The Consumer Financial Protection Bureau ‘is here to stay’


The Consumer Financial Protection Bureau (CFPB) is the brainchild of Elizabeth Warren. As a Harvard Law professor, she spearheaded the drive to protect consumers seeking credit to purchase a home or car, or anything else. 

Created in 2010, the bureau, along with several other federal agencies, have long faced challenges from conservatives and financial institutions. They claim that these agencies’ regulations interfere with free-market capitalism and indicate government overreach. They symbolize the federal government’s “deep administrative state”: This is the argument by conspiracy theorists that federal bureaucrats undermine American democracy. They contend that Congress should severely limit the agencies’ authority.

The Supreme Court decided one of the latest assaults on the CFPB on May 16. 

Three years before its creation, Warren wrote that while consumers may well trust some banks and other financial institutions, “for a growing number of families who are steered into overpriced credit products, risky subprime mortgages, and misleading insurance plans, trust in a creditor turns out to be costly. And for families who get tangled up with truly dangerous financial products, the result can be wiped-out savings, lost homes, higher costs for car insurance, denial of jobs, troubled marriages, bleak retirements, and broken lives.”

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 to overcome the toxic financial impact of the 2008 “Great Recession,” when financial markets collapsed. Part of the bill included the creation of the CFPB within the Federal Reserve.

Warren was slated to become its first director, but President Obama withdrew her nomination when it became clear that Republican opposition could not be overcome. Instead, she became an assistant to the president and a special advisor to the secretary of the treasury. Two years later, she was elected to the U.S. Senate.

The agency survived a 2020 attack on its leadership when the Supreme Court ruled that the president of the U.S. may dismiss its director at will, and not just for cause, as the legislation stated (Seila Law LLC v. Consumer Financial Protection Bureau). Chief Justice John Roberts wrote for a five-to-four majority that the agency could continue to operate, “but its Director, in light of our decision, must be removable by the President at will.” In contrast, Dodd-Frank empowered the president to remove the director only for “inefficiency, neglect of duty, or malfeasance in office.”

The idea was for the agency to maintain its independence from political interference. According to the Associated Press, Elizabeth Warren, today the senior Massachusetts senator, noted that the court “handed over more power to Wall Street’s army of lawyers and lobbyists to push out a director who fights for the American people,” even though the CFPB is “still an independent agency.”

A few weeks ago, on May 16, the CFPB survived another challenge, this time on the source of its funding (Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited). Article I of the Constitution includes the Appropriations Clause, which states that Congress holds the power of the purse, meaning it alone decides how federal monies are spent. The CFPB is not funded directly by Congress but by the Federal Reserve, to the tune of around $600 million a year.

Writing for the court in a seven-to-two decision, Justice Clarence Thomas was joined by an unusual group of conservatives and liberals: Chief Justice Roberts along with Justices Sonia Sotomayor, Elena Kagan, Brett Kavanaugh, Amy Coney Barrett, and Ketanji Brown Jackson. As an originalist, Thomas looked to the origins of government funding at the time the Constitution was ratified in the late 18th century. He concluded that after surveying the history of how funds were allocated at that time, “at a minimum, appropriations were understood as legislative means of authorizing expenditure from a source of public funds for designated purposes.”

He ruled that when Congress empowered the Federal Reserve to fund the CFPB, it satisfied this procedure. “The origins of the Appropriations Clause confirm that appropriations needed to designate particular revenues for identified purposes. Beyond that, however, early legislative bodies exercised a wide range of discretion.” He held that Congress exercised its discretion by allocating authority to the Federal Reserve as the source to fund the agency.

Dissenting along with Justice Neil Gorsuch, Justice Samuel Alito was outraged. He wrote that “centuries of historical practice show that the Appropriations Clause demands legislative control over the source and disposition of the money used to finance Government operations and projects.” Alito wrote that only Congress, not the Federal Reserve, can fund the agency. It was a remarkable victory for the Consumer Financial Protection Bureau and for the American public. As Senator Warren noted after Thomas’s decision was released, “the Supreme Court followed the law, and the CFPB is here to stay.” A very good thing for the American consumer.


Jack Fruchtman, who lives in Aquinnah, serves on the board of directors and executive committee of the Vineyard Conservation Society. The views expressed here are his own, and not those of VCS.


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