The Supreme Court has spoken: the Consumer Financial Protection Bureau's (CFPB) funding mechanism is constitutional. In its long-awaited ruling in the case of Community Financial Services Association of America Ltd. v. CFPB, the Court held that the CFPB's funding structure satisfies the Appropriations Clause of the United States Constitution. The CFPB provided its comments via a press release shortly after the Supreme Court published its opinion

Calling the legal arguments raised in the case a "radical theory that would have devastated the American financial markets," the decision sends a message that the CFPB is here to stay. Making its position clear, the CFPB's statement goes on to say,  “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.”

Providing some broad insight into its future aims, the CFPB says it will "continue carrying out the vital consumer protection work Congress charged us to perform for the American people."

As for the case itself, the Supreme Court directed that the legal proceedings shall continue. 

You can read the full opinion here and the CFPB's press release here.


Here are some initial thoughts from Joann Needleman, an avid watcher of the CFPB, a former member of the CFPB Consumer Advisory Board, a member at Clark Hill, and a Consumer Relations Consortium Legal Advisory Board Member.

Thoughts (From Joann Needleman):

  • That Justice Thomas authored the opinion suggests how weak the industry’s argument was. He has, in other opinions, been very skeptical of the power of administrative agencies. This challenge was about the definition of appropriations, or at least this is how CSFA wanted to frame. They failed and it was evident in oral argument. He spent his entire opinion writing the history lesson of appropriations, basically saying to CFSA, you failed to do your homework.
  • Kagen added that nothing in the history put any limits on appropriations (i.e. timing and amounts).
  • Justice Jackson takes a swipe addressing separation of powers and basically says, stop coming to the court for every little discrepancy. Maybe a swipe to the other justices when they involve the major questions doctrine.  Here however, there really is no separation of powers.  
  • Alito’s and Gorsuch’s dissent basically provide future Congressional direction for agency appropriation. 

 Takeaways (From Joann Needleman):

  • Court has closed the book on whether there should be a CFPB. However, there seems to be an appetite for challenges on how they wield power. Thomas was very clear that his opinion addressed only the narrow issue of what does it mean to “appropriate”.
  • The battle for the credit card late fee rule is back in play. The Texas District Court stayed the case based on this Supreme Court decision and for nothing more. There are a few other cases that are stayed pending this case and I expect to see more litigation about the CFPB’s authority.
  • The decision is not surprising and it will not be surprising to the CFPB. They have been quietly coordinating behind the scenes, especially around supervision, to really unleash once this decision came out.
  • It will be like waking up a bear during hibernation.


insideARM Perspective

This is a developing story. Several cases were stayed or had decisions issued based on the Fifth Circuit's opinion, most recently a case that came out last Friday granting a preliminary injunction halting the CFPB's Late Fee Rule. This decision will have downstream effects across the legal landscape and the financial services industry. We will continue to bring you insights, analysis, and key takeaways in the coming days. 

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