May 16, 2024 — Press Release

Decision Preserves 13 Years of Consumer Protection Regulation; Returns CFPB’s Focus to its Mission to Protect Consumers

WASHINGTON – Today, the U.S. Supreme Court ruled 7-2 in favor of the Consumer Financial Protection Bureau (CFPB), delivering a major victory to consumers in the latest in a long series of challenges to the nation’s top consumer watchdog’s independent funding structure and to its mission to protect consumers in the financial marketplace. 

“The Bureau’s funding mechanism does not violate the Appropriations Clause,” said Justice Clarence Thomas, writing for the majority. 

The case, CFPB v. Community Financial Services Association, brought by the payday loan trade association, threatened the very existence of the CFPB when the Fifth Circuit Court of Appeals agreed that rules enacted using the agency’s current funding structure were unlawful. Today’s decision overturns that ruling, strengthening the CFPB’s ability to deliver on its mission to protect consumers and to ensure fairness in the consumer financial markets. 

“The CFPB can now fully focus on its essential work protecting hard-working people from predatory practices and discrimination in financial services,” said Richard Dubois, executive director of the National Consumer Law Center. “The Court was wise to recognize that the plaintiffs’ self-serving attack on this important consumer watchdog was not justified or legal. The CFPB’s valuable work to address junk fees, medical debt on credit reports, and fair housing and language access, among other important issues, can continue unimpeded.” 

The case arose out of a challenge brought by payday lenders to rules that the CFPB issued to prevent payday lenders and other high-cost lenders from repeatedly re-submitting loan payments that bounce, triggering multiple nonsufficient funds and overdraft fees. The Fifth Circuit found that the rule was justified and was within the CFPB’s authority, but the court struck down the rule on the grounds that it was promulgated using funding that did not go through the annual congressional appropriation process.

In the wake of the 2008 financial crisis, Congress created the CFPB as an independent and autonomous agency to protect consumers and to help restore consumer confidence in the financial markets. Congress granted the CFPB the authority to monitor and police financial institutions and funded the CFPB in a similar manner to other banking agencies, ensuring the agency’s stability and political independence with funding through the Federal Reserve.

“Predatory lenders and companies that rip consumers off with illegal junk fees have been trying to undermine the CFPB since it was created, and their attack on the CFPB’s funding was a baseless attempt to reclaim the power of corporate lobbyists to defund the agency and use back-room deals to protect unfair practices,” said Lauren Saunders, associate director of the National Consumer Law Center. “The CFPB can now resume enforcement actions that have been frozen against illegal or deceptive practices by high-cost lenders that ripped off servicemembers, student debt relief schemes, and predatory auto lenders that hid the costs of loans designed to fail.”

Since its establishment in 2010, the CFPB has effectively used its authority to serve the public interest. The CFPB’s supervision and enforcement actions alone resulted in $19 billion in ordered relief for more than 195 million eligible consumer accounts. Over the same period, the CFPB has issued $4.8 billion in civil money penalties to hold bad actors accountable and deter abusive practices. 

“The CFPB’s effective regulation of credit bureaus, big banks, debt collectors, and other financial services industries has made it a lightning rod for lawsuits and judicial challenges by industry trade groups and lobbyists,” said Chi Chi Wu, senior attorney at the National Consumer Law Center. “Ongoing challenges to the CFPB’s regulations, including a lawsuit to overturn the rule to limit credit card late fees, mean the battle to defend the Bureau’s strong protections for consumers is far from over.”

Recent CFPB rules and enforcement actions have made progress in many areas important to low income consumers, including: 

Junk Fees

Medical Debt on Credit Reports

Background Checks and Tenant Screening

Fair Housing and Language Access

Additional Resources

Support NCLC

Please support NCLC's work to advance consumer rights and economic justice with a tax-deductible contribution today!