‘CFPB here to stay’ director vows following high court’s ruling that funding mechanism is constitutional

The funding mechanism of the federal consumer financial protection agency is neither novel nor unusual, but an “essential part of the nation’s financial regulatory system,” the director of the agency said in a statement Thursday following a U.S. Supreme Court decision upholding the agency’s financing scheme.

“Today’s decision is a resounding victory for American families and honest businesses alike, ensuring that consumers are protected from predatory corporations and that markets are fair, transparent, and competitive,” said Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra.

“For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement.” Chopra said. “The Supreme Court has rejected their radical theory that would have devastated the American financial markets. The Court repudiated the arguments of the payday loan lobby and made it clear that the CFPB is here to stay.”

The court’s decision, 7-2, upheld the funding mechanism for the agency which had been challenged as unconstitutional by the Community Financial Services Association of America, Ltd.

The challenge to the agency’s funding scheme had been brought by the payday lending industry. The group’s argument was affirmed by a federal appeals court; the CFPB appealed to the Supreme Court, which heard the case last fall.

The payday lenders argued that the agency’s funding through the Federal Reserve is unconstitutional “because Congress provided the CFPB its funding through a law other than annual appropriations bills.”

But the high court disagreed. Justice Clarence Thomas, who wrote the opinion, said the CFPB is different.

“The Bureau does not have to petition for funds each year,” Thomas wrote. “Instead, Congress authorized the Bureau to draw from the Federal Reserve System the amount its Director deems ‘reasonably necessary to carry out’ the Bureau’s duties, subject only to an inflation-adjusted cap.

“In this case, we must decide the narrow question whether this funding mechanism complies with the Appropriations Clause. We hold that it does,” Thomas concluded.

Director Rohit Chopra Statement on Supreme Court Decision in CFPB v. CFSA

SCOTUS decision: Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd.

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