October 3, 2023

Supreme Court agreed to hear arguments on monday A case challenging the constitutionality of funding for consumer financial protection bureau,

– Advertisement –

The order to take up the case came four months after a federal appeals court panel unanimously ruled that the CFPB Grant The system was unconstitutional.

The Biden administration has said the decision, which threw out CFPB regulation targeting payday lenders, called into question every order and other action issued by the consumer watchdog in its history.

– Advertisement –

Included in those actions is a recent record $1.7 billion civil penalty, in addition to $2 billion in agency-mandated customer restitution. Wells Fargo For misuse relating to customer accounts.

The CFPB, created by the Dodd-Frank Act shortly after the global financial crisis of 2008, is funded by the Federal Reserve, not Congress.

– Advertisement –

That funding option was adopted by the Democratic-controlled Congress to help insulate the CFPB from political pressure. Republicans have expressed opposition to the existence of the agency, which oversees consumer markets such as credit cards and home mortgages.

In its decision in October, a three-judge panel on the US Court of Appeals for the 5th Circuit said the funding mechanism violated the Constitution and instead the agency’s funding should be appropriated by Congress from the US Treasury.

“The bureau’s funding plan is unique among the myriad independent executive agencies in the federal government,” the panel said in its decision written by Judge Corey Wilson. “It is not funded with appropriations from Congress from time to time.”

See also  Major crypto lender BlockFi files for bankruptcy protection

The Biden administration had asked the high court to hear its appeal of that decision, which the court agreed to do in its order on Monday.

But the Supreme Court also said it would hear arguments in the case during its next term, which begins in October, and not during the current term as requested by the Biden administration. This means that the final decision in the matter may be delayed till June 2024.

Sen. Elizabeth Warren, D-Mass., who first proposed the creation of the CFPB, said in a statement, “Despite years of desperate attacks from Republican and corporate lobbyists, the constitutionality of the CFPB and its funding structure have been repeatedly vetted.” has been upheld. And time again.”

Warren said, “If the Supreme Court follows more than a century of law and historical precedent, it will overturn the Fifth Circuit’s decision before it plunges our financial markets and economy into chaos.”

But a lawyer for two payday-lending advocacy groups that are plaintiffs in the case said the court’s decision to hear the dispute “Demonstrates the importance of the issues of separation of powers in this case.”

“As we have demonstrated, and the Fifth Circuit Court of Appeals has held, the CFPB’s self-funding mechanism, lacking any contemporary or historical precedent, unreasonably shields the agency from congressional oversight and accountability, and unconstitutionally deprives Congress of the power to purse the “Appropriations Clause of the Constitution,” said Christian Vergonis, an attorney with the law firm Jones Day.

Vargonis said his clients, the Community Financial Services Association of America and the Consumer Service Alliance of Texas, “look forward to presenting these arguments to the Supreme Court.”

See also  McCann dad and mom lose libel case in opposition to Portuguese former detective

In a statement, the private government watchdog group Accountable.US called the Payday plaintiffs’ lawsuit “baseless” and said it was “the crown jewel in a long-running, highly organized effort by greedy industries and right-wing politicians.” to take the CFPB out of their pocket because it does a great job of protecting consumers from abuse.”

“It is fitting that predatory lenders are leading this latest assault because no industry has a bigger ax to grind against the CFPB after facing multiple fines for mistreating consumers,” Liz Zelnick, said Accountable.US’s director of economic security and corporate power.

The Supreme Court, in a 2020 ruling, allowed the CFPB to continue operating, but also said that a provision of the law creating the agency was unconstitutional because it violated the separation of powers rule.

That provision stated that the director of the CFPB could be removed from that position “for just cause”.

The court said in its 5-4 decision that year that the director must be removable at the pleasure of the president for any reason.

Since its creation in 2010, the CFPB has recovered over $15 billion for customers.