The Reporter (Lansdale, PA)

Justices to hear challenge to consumer agency

- By Jessica Gresko

>> The Supreme Court said Monday it will take up a Republican-led challenge to the Consumer Financial Protection Bureau, a case that could threaten how the consumer watchdog agency functions. It is the second time in three years that the justices will be examining the federal agency, which was created in the wake of the 2008 financial crisis.

The case will not be heard before October. That’s when the court begins its next term.

Late last year, a federal appeals court — the U.S. Court of Appeals for the 5th Circuit — ruled that the agency’s funding structure is unconstitu­tional, threatenin­g its ability to function. The Biden administra­tion asked the high court to review that decision, which it has now agreed to do.

The administra­tion said the lower court’s ruling “calls into question virtually every action the CFPB has taken” since its creation. The decision “threatens to inflict immense legal and practical harms on the CFPB, consumers, and the nation’s financial sector,” the administra­tion said.

Since the bureau was created more than a decade ago by the DoddFrank Act, it has varied in its aggressive­ness. During the Obama administra­tion, it used its muscle to collect fines from banks and credit card companies; during the Trump administra­tion, it drasticall­y scaled back enforcemen­t actions.

Republican­s have argued that the agency has unchecked power.

The case the justices agreed to hear centers on the agency’s funding. Unlike a majority of agencies, the CFPB does not get its funding from the annual budget process in Congress. Instead, it is funded directly by the Federal Reserve.

The agency’s budget is capped at 12% of the total operating expenses of the Federal Reserve System. In the 2022 fiscal year, the agency received about $640 million.

The case the justices will hear began when two associatio­ns sued over the agency’s Payday Lending Rule. They argued in part that the agency’s funding structure violated the Constituti­on, improperly insulating the agency from congressio­nal supervisio­n. A trial court ruled against the associatio­ns, but the appeals court agreed the funding structure was unconstitu­tional.

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