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Consumer Financial Protection Bureau (CFPB) Section 1071

Consumer Financial Protection Bureau (CFPB) Section 1071

In September 2023, a federal judge granted an injunction delaying the compliance dates for the CPFB Section 1071 final rule while the Supreme Court heard a separate case – involving the same parties - weighing the constitutionality of the CFPB’s funding structure. 

In May 2024, the Supreme Court preserved the Consumer Financial Protection Bureau (CFPB) by upholding the bureau’s funding mechanism as constitutional in a 7-2 vote. 

The justices’ decision caps a battle that marked the biggest legal threat to the CFPB since it was established in the wake of the 2008 financial crisis.

As previously reported, two lender trade associations – including the American Bankers Association (ABA) - backed by business groups and all the nation’s Republican state attorneys general, contended the agency’s funding from the Federal Reserve violates Congress’s so-called “power of the purse”. Writing for the majority, Justice Clarence Thomas rejected that argument and sided with the Biden administration. Conservative justices Samuel Alito and Neil Gorsuch were the only two justices to dissent.

Established as part of the Dodd-Frank Wall Street reform law, lawmakers looked to insulate the CFPB by creating a funding mechanism outside Congress’s annual appropriations process.  In its ruling, the high court acknowledged that the CFPB is “different” than other agencies but determined its method of drawing funds from the Federal Reserve System that its director has deemed “reasonably necessary to carry out” is constitutional.

The ABA issued a brief update on how this ruling affects the other lawsuits ABA and others have brought against the CFPB on several policy issues.

  • Regarding ABA’s challenge with the Texas Bankers Association (TBA) to the Section 1071 final rule, they believe that members of ABA and TBA will have approximately 290 extra days from the original compliance dates in the final rule. In the meantime, ABA’s case on the merits will continue in Texas, and they hope to have a decision by the end of the year.
  • Regarding ABA’s successful challenge to the CFPB’s UDAAP manual update — which ABA won at the trial court level — the CFPB’s appeal of the victory can now proceed.
  • Finally, regarding ABA’s challenge with the U.S. Chamber and other plaintiffs to the CFPB’s credit card late fees final rule, ABA is still evaluating how the decision affects the preliminary injunction. ABA will continue to argue for the preliminary injunction to be extended on other legal grounds.