Before she became a Massachusetts US senator and while she was still an academic, Elizabeth Warren proposed the creation of a watchdog government agency that would look after the interests of consumers when it came to financial matters. That agency, known as the Consumer Financial Protection Bureau, became a reality in 2010 during the Obama administration in the teeth of fierce opposition from business interest and the Republican party.

The CFPB was meant to ensure that people would be treated fairly by “banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies”. In order to ensure greater independence, the legislation creating the CFPB required that it be funded through the Federal Reserve and not through annual Congressional appropriations, where it could be eliminated during the budgetary process.

Opponents of the CFPB launched one legal challenge after another to try and have it eliminated or at least have its powers drastically curtailed, but they all failed. The most recent one, and one of the most serious, was brought by payday lenders who were irked by the limits that the CFPB imposed on their industry. They sued, arguing that the funding structure was unconstitutional. While a US district court rejected their claim, the Fifth Circuit Court of Appeals, the most conservative in the country, ruled in their favor and the case went up to the US Supreme Court.

But in a surprise, the Supreme Court ruled late last week by a 7-2 margin (with Clarence Thomas writing the majority opinion with Samuel Alito, who has consistently shown himself to be a partisan hack, and Neil Gorsuch being the two dissenters) that the funding structure was constitutional. This has energized the agency.

The Consumer Financial Protection Bureau was bracing for survival until the Supreme Court ended years of uncertainty by ruling that its funding stream is constitutional.

Now, the agency is poised to resume its role as Wall Street’s biggest nemesis.

The bureau said Friday that it will expand its enforcement office by nearly 40 percent, renew its push to pursue more than a dozen court cases and legal actions that were stalled by the litigation and develop new regulations on credit markets.

“The court’s ruling makes crystal clear the CFPB is here to stay,” Director Rohit Chopra said on a call with reporters Friday. “The CFPB will be firing on all cylinders.”

Needless to say, many financial sectors are upset that they have been prohibited from having a free rein at the expense of consumers.

The closely watched case had threatened to severely curtail the power of the bureau, which has been a partisan lightning rod since it opened its doors in 2011. The agency, which says it has returned $20 billion to consumers since its inception, was the brainchild of Sen. Elizabeth Warren (D-Mass.), then a professor, and she helped set it up.

The case also posed a potential threat to the viability of other agencies across the government, including the Federal Reserve and other banking regulators, who also don’t draw money from the congressional appropriations process. And if the high court had upheld a lower court’s ruling throwing out a 2017 payday lending rule, a broad swath of other CFPB regulations would have been thrown into question.

Financial industry groups, many of which have long loathed the bureau because of its aggressive enforcement, were divided over the outcome. While the payday lenders sought nullification of agency rules, mortgage bankers warned that a decision casting doubt on existing regulations would throw their market into turmoil.
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The enforcement office is adding 75 staff members — attorneys, investigators, paralegals and economists — to its ranks for a total of 275 staff, a senior CFPB official said.

The bureau is also pursuing 14 matters — including litigation and Civil Investigative Demand enforcement actions — which had been stayed or were inactive because one of the companies in question cited the pending Supreme Court case, the official said.

Chopra also hinted at new regulations on the horizon: “Expect to see more work when it comes to credit reports and credit scores,” he said.

Republicans are still vowing to rein in the agency, which they see as a rogue regulator with little accountability.
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Warren said she expects additional future attacks on the agency.

“The big banks came after us, payday lenders came after us, the Republicans came after us, and we’re still standing,” she said. “We don’t fool ourselves. They’ll come back again. They’ll have another attack. They’ll figure out another way to go after the agency. They’ll do it again and again and again.”

Yes, they will. But this ruling means that opponents of the CFPB have a much tougher task ahead. They will be able to try and chip away at its powers but the very existence of the body is now more secure.

You can read the opinion here and also an analysis of the opinion.