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Supreme Court Upholds Consumer Financial Protection Bureau Structure
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On Thursday, June 29, 2023, the Supreme Court of the United States ruled 7-2 in Consumer Financial Protection Bureau v.Community Financial Services Association of America, Ltd. that the structure of the Consumer Financial Protection Bureau (CFPB) is constitutional. The decision preserves the agency’s independence and authority to regulate financial institutions.
Background of the Case
The case originated from a 2017 lawsuit challenging the CFPB’s structure as violating the separation of powers principle. The Community Financial Services Association of America,Ltd., a payday loan industry group, argued that the CFPB’s single-director leadership, with limited removal power by the President, concentrated too much power in one individual. The Fifth Circuit Court of Appeals initially sided with the industry group on October 19, 2022.
The Supreme Court’s Ruling
Justice Clarence Thomas delivered the majority opinion, stating that the CFPB’s structure does not violate the Constitution. The court found that while the CFPB’s single-director structure is unusual, it is not unprecedented. The ruling noted that Congress has historically created agencies with similar structures.
“The CFPB’s unusual structure does not violate the Constitution,” Justice Thomas wrote. “Congress has created agencies with similar structures, and the CFPB’s structure is consistent with the Constitution’s framework.”
Justices Samuel Alito and Neil Gorsuch dissented, arguing that the CFPB’s structure gives the director too much power and lacks sufficient accountability to the president.
Impact of the Decision
The ruling effectively validates the CFPB’s actions since its creation under the Dodd-Frank Wall Street Reform and Consumer Protection act on July 21, 2010. The CFPB has returned over $14 billion to more than 30 million consumers since its inception, according to the agency’s website. The decision also impacts ongoing and future CFPB regulations, including rules concerning payday lending and debt collection.
CFPB Response
CFPB Director Rohit Chopra released a statement on june 29, 2023, stating the agency “will continue its work to protect consumers and ensure fair markets.” He added that the ruling “reaffirms that Congress created the CFPB as a powerful self-reliant agency to protect American families.”