Washington, D.C. — Since opening its doors 12 years ago, the Consumer Financial Protection Bureau (CFPB) has been a formidable advocate for everyday Americans and holding financial institutions accountable. This term, the U.S. Supreme Court is considering a case, CFPB v. Community Financial Services Association of America, Limited (CFSA), that challenges the agency’s funding structure, and its decision could spread uncertainty and harm to consumers and financial markets. A new Center for American Progress report discusses Congress’ intent to establish the CFPB as an independent financial regulator, the faulty logic emanating from the 5th Circuit Court of Appeals’ decision in the case, and the wide-ranging legal and consumer implications if the CFPB’s funding is deemed unconstitutional by the Supreme Court. It also analyzes the potential spillover effects to other similarly structured federal financial agencies, such as the Federal Reserve and the Federal Deposit Insurance Corporation, creating regulatory and economic uncertainty.
The current challenge to the agency in CFPB v. CFSA threatens its congressionally given independence. If the Supreme Court upholds the 5th Circuit’s decision that the CFPB’s funding is unconstitutional, there could be a cascade of effects, from inviting lawsuits to irrevocably harming Americans’ chief consumer advocate and its ability to enforce the wide range of consumer protection statutes it oversees, as well as potentially throwing financial markets into disarray.
“The Supreme Court must be conscious of the wide-ranging effects of the decision and the impact it could have on both consumers and the financial markets as a whole,” said Devon Ombres, senior director for Courts and Legal Policy at CAP and co-author of the report. “This court should resist the urge to legislate from the bench and should reject the CFSA’s claims in whole, maintaining the CFPB’s autonomy as intended by Congress when the agency was created.”
“The CFPB’s independent structure has made it a successful advocate for protecting consumers against unfair, deceptive, and abusive practices by banks, mortgage companies, payday lenders, and more, returning $17.5 billion to wronged customers since it began operating,” said Alexandra Thornton, senior director of financial regulation for Inclusive Economy at CAP and co-author of the report. “If the Supreme Court decision finds the CFPB’s funding unconstitutional, consumers, financial markets, and the economy will suffer.”
Read the report: “CFPB v. CFSA: How the Supreme Court Could Harm Consumers and Financial Markets” by Lilith Fellowes-Granda, Devon Ombres, Alexandra Thornton, and Crystal Weise
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