News Release: Bank Lobby Misleads Supreme Court on Financial Stability Implications of CFPB Case


July 12, 2023

William Pierre-Louis, Jr.

Bank Lobby Misleads Supreme Court on Financial Stability Implications of CFPB Case

Washington, D.C. — The U.S. Chamber of Commerce and financial services lobby groups are misleading the Supreme Court that it could limit the damage and market destabilization that would result from upholding a radical, legally unprecedented Fifth Circuit Court ruling that the funding structure of the Consumer Financial Protection Bureau is unconstitutional. 

“The same industry lobbyists who opposed CFPB from its inception are now claiming the Supreme Court can pull the rug out from under the consumer financial services market without any serious consequences,” said Elyse Hicks, consumer policy counsel at Americans for Financial Reform. “This argument would be laughable if the risks to financial markets, already rocked by a banking crisis this year, were not so great.”

The Supreme Court case, which was added to the fall term’s docket in February, involves a challenge by the Consumer Financial Services Association (the payday lending lobby) to a 2017 regulation protecting consumers from predatory loans. The Fifth Circuit, a well-known right-wing redoubt, incorrectly concluded that the CFPB’s funding mechanism is unconstitutional, and the Court took up the case at the Solicitor General’s request. Since then, the Second Circuit Court ruled the CFPB’s funding is constitutional and stated that it “cannot find any support” for the Fifth Circuit’s ruling in Supreme Court precedent. 

Because CFPB sets the rules of the road in key consumer financial markets – especially in housing, after the 2008 financial crisis – the Fifth Circuit decision raised the prospect that other regulations would be at risk. The Mortgage Bankers Association, in an earlier case concerning the CFPB’s constitutionality before the Supreme Court, warned that undoing the CFPB’s rules “could destabilize critical segments of the national economy.”

The Chamber and industry groups argue in a brief filed this week that the Supreme Court should narrowly vacate the payday rule on the grounds that it was promulgated by an unconstitutionally funded agency. They also proposed other complicated measures – keeping some rules but potentially overturning others – they claim will prevent chaos in financial markets while Congress revises the 2010 Dodd-Frank Act, which created the agency. 

“Upholding a ruling that the CFPB is funded unconstitutionally necessarily calls into question every rule and enforcement action the CFPB has conducted in the past 12 years and would be a radical and unprecedented step for the judiciary,” said Hicks. “The industry lobby can contrive whatever attempted fixes it wants. But in fact it wants the Supreme Court to risk financial stability for the purpose of destroying an agency that predatory lenders and  abusive financial industry players of all kinds oppose precisely because it makes it harder for them to rip people off, discriminate, or treat customers unfairly.” 

Notably, the Mortgage Bankers Association and other housing-related lobby groups have been much more circumspect in their arguments to the Supreme Court. Staying neutral on the case, they have simply urged the Court not to call into question previous regulations, while warning of “catastrophic consequences” if there is doubt about the validity of CFPB rules.

In a wave of pro-CFPB amicus briefs earlier this Spring that describe how the Fifth Circuit’s decision is wrong on the law and has no basis in the Constitution, history, or Supreme Court precedent, members of Congress, scholars, legal experts, and public interest groups argued that maintaining the integrity and effectiveness of the CFPB is crucial in ensuring consumer financial protection and upholding fair practices in the financial sector. These groups outlined how attempts to erode the CFPB’s authority could have far-reaching consequences for consumers, other federal agencies, and the stability of the broader financial system.

Despite the legal pressure, the CFPB has continued to fulfill its mission of protecting consumers and has won $17.4 billion in restitution, canceled debts, and other forms of relief for consumers since its inception.