Supreme Court upholds funding structure for consumer watchdog agency The opinion was written by Justice Clarence Thomas, who reversed the decision of the 5th Circuit. Justices Neil Gorsuch and Samuel Alito dissented.

Law

Supreme Court upholds funding structure for consumer watchdog agency

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MARY LOUISE KELLY, HOST:

Today, the U.S. Supreme Court has upheld the structure of the Consumer Financial Protection Bureau. That's the watchdog agency set up by Congress after the 2008 financial crash with a goal of protecting consumers from predatory and deceptive practices by financial institutions. Here to explain, NPR's legal affairs correspondent Nina Totenberg. Hey there.

NINA TOTENBERG, BYLINE: Hi there.

KELLY: Start with the stakes, Nina. Why is this decision so important?

TOTENBERG: Because if it had gone the other way, it could have led to invalidating not only the funding structure of the CFPB, but lots of other government agencies - from Social Security and Medicare, which are funded by special taxes, to the FDIC, which protects bank depositors, and even the Federal Reserve, which is funded by fees collected by the board.

In fact, this case was remarkable in that the CFPB was supported by groups that normally don't side with regulators - even the CFPB sometimes - the mortgage bankers, the homebuilders, the realtors' associations. They all warned that an adverse decision could send the housing market into chaos.

So today, they're all breathing a sigh of relief. The Supreme Court has upheld the CFPB funding mechanism even though it was not an annual appropriation, and it did it by a 7-2 vote.

KELLY: OK. So significant because of precedent, among other things - but back up for a minute. Just - how did we get here? Who brought this challenge?

TOTENBERG: This challenge was brought by payday lenders who have often reaped very big profits from people of limited means who need a short-term loan. For instance, payday lenders routinely rolled over the amount due, tacking on fees as often as twice a day so that borrowers ended up owing thousands of dollars on loans as small as $250. And in an attempt to protect consumers, the CFPB enacted a rule to limit those repeated fees.

The payday lenders challenged those rules in court. They lost repeatedly until the Fifth Circuit Court of Appeals, which covers Texas and much of the Deep South, ruled that the agency's funding mechanism was unconstitutional because Congress, rather than funding it through annual appropriations, funded it through fees collected by the Federal Reserve system. Now the Supreme Court has reversed that decision.

KELLY: And walk me through this ruling. What exactly did the court say?

TOTENBERG: Writing for the court majority, Justice Clarence Thomas focused on the text and history of the Appropriations Clause of the Constitution, which he said gives Congress broad discretion and flexibility as to how it authorizes funds to be drawn from the Treasury. He noted, for instance, that the very first Congress allowed several executive agencies to fund themselves from revenue they collected, much like the CFPB does today in getting a capped amount from fees collected by the Fed.

There was one rather odd feature of the Thomas decision today. His was the opinion of the court for all seven members of the majority, but five of those seven wrote or signed onto concurring opinions.

KELLY: Hmm. That's interesting. Why?

TOTENBERG: Well, I'm really not sure, except that Justice Kagan's concurrence was joined not just by liberal Justice Sotomayor, but by two of the court's Trump appointees - Justices Barrett and Kavanaugh. And they all stress that not just at the founding, but throughout our history, Congress has had flexibility in making spending decisions. Now, Kagan's not a justice who usually writes just to hear the sound of her own voice, so something is going on here.

Maybe it's a signal to the Fifth Circuit, which has become something of an outlier in making decisions that wipe out not just decades but hundreds of years of precedent. We're just going to have to wait and see.

KELLY: NPR's Nina Totenberg, Thank you, Nina.

TOTENBERG: Thank you.

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