Elizabeth Warren predicts ‘bad decision’ by Supreme Court could upend her CFPB brainchild
Kaelan Deese
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Sen. Elizabeth Warren (D-MA) warned on Thursday that a “bad decision” in a case being heard by the Supreme Court next week could threaten her brainchild agency, the Consumer Financial Protection Bureau.
Warren, a key framer of the federal financial watchdog that regulates banking and lending agencies, signaled that the 6-3 Republican-appointed majority on the high court could jeopardize federal health insurance programs such as Social Security and Medicare if the justices scrutinize the constitutionality of the CFPB’s funding mechanism.
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“For MAGA Republican lawmakers, pain is the point. Chaos is the point. Government that cannot work for the people is the point,” Warren said during a speaking event at the Center for American Progress in Washington, D.C., chiding Republicans and conservative groups that have filed briefs supporting lenders who are urging the high court to rule against the CFPB.
The lawsuit, Consumer Financial Protection Bureau v. Community Financial Services Association of America, was brought by key players in the payday lending industry who say the CFPB is unconstitutionally funded by the Federal Reserve, while most federal agencies received appropriation from Congress.
Warren, who helped create the CFPB after the 2007-2008 financial crisis, countered that other banking regulators such as the Federal Deposit Insurance Corp., as well as Social Security and Medicare, are funded outside the Congress’s annual budget-setting process.
The Massachusetts Democrat argued that a “bad decision by the Supreme Court could wreck the financial security of millions of families and turn our economy upside down,” noting that permitting lawmakers to establish budgets for those agencies could “evaporate” their political independence.
The Biden administration has said the stakes in the case are so high that a ruling against the agency could threaten its ability to function, saying it would stymie the federal government’s ability to protect financial consumers.
Conversely, critics of the agency say the funding structure outside of Congress’s control gives the CFPB an “unholy union of the powers of the purse and sword,” according to an amicus brief from the Americans for Prosperity Foundation.
Lower courts have been split on the issue, and a federal judge sided with the CFPB in 2021. That decision was followed by a three-judge panel on the U.S. Court of Appeals for the 5th Circuit vacating a payday lending rule last October, finding a link between it and the agency’s funding mechanism.
“For the most part, the Plaintiffs’ claims miss their mark,” the appeals court held. “But one arrow has found its target: Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers.”
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The Supreme Court is preparing to embark on a term that has the potential to deal a significant blow to agency powers, including a case challenging the Securities and Exchange Commission’s practice of in-house adjudications and whether agencies in general have the ability to impose regulations that aren’t specifically greenlighted by Congress.
Justices will consider the CFPB case on Oct. 3, and a decision on the matter could surface as early as December.
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