Reed Smith Client Alerts

Key takeaways

  • The U.S. Supreme Court finds that the CFPB’s funding structure complies with the Constitution.
  • The CFPB swiftly released a statement citing the decision as a “resounding victory for American families and honest businesses.”
  • Since the U.S. Supreme Court decision, the reinvigorated CFPB has focused its sights on mortgage closing costs and Buy Now, Pay Later lenders.

On May 16, 2024, the U.S. Supreme Court held that the Consumer Financial Protection Bureau’s (CFPB) funding structure does not violate the Appropriations Clause of the U.S. Constitution. Justice Clarence Thomas authored the Court’s majority opinion and, in an unusual division of conservative voices, Justices Samuel Alito and Neil Gorsuch dissented. Since this decision, the reinvigorated CFPB has set its sights on the rise in mortgage closing costs, including credit reporting costs, and buy now, pay later lenders.

By way of background, the Community Financial Services Association of America and the Consumer Service Alliance of Texas – trade associations that represent payday lenders and credit-access businesses – filed suit against the CFPB in 2018 to challenge its regulations against high interest consumer loans. The lawsuit required a court in the Western District of Texas to review whether the CFPB’s funding structure complied with the Appropriations Clause of article I, section 9, clause 7 of the U.S. Constitution. The trial court found in the CFPB’s favor, and the Fifth Circuit Court of Appeals reversed, leading to the appeal to the U.S. Supreme Court.