The Supreme Court ruled in favor of the Consumer Financial Protection Bureau (CFPB) in a challenge brought forward by the disgruntled payday loan industry.

In a 7-2 court decision, the Supreme Court found that the agency didn’t violate the U.S. Constitution.

Payday lenders sued the agency over a rule that would limit how many times they could deduct payments from a customer’s bank account.

The lawsuit was backed by conservative groups and lawmakers who argued that the CFPB’s funding—which doesn't need congressional approval—was unconstitutional.

Critics argued that the agency advances its own agenda under the guise of consumer protection and that its independence weakens "democratic accountability."

Nevertheless, President Biden called the court decision “an unmistakable win for American consumers [...] In the face of years of attacks from extreme Republicans and special interests.”

Congress established the CFPB following the 2008 financial crisis to ensure that consumers don’t get lured into “predatory and deceptive” practices by banks and lenders.

In 2023, the agency pursued 29 enforcement actions, collecting more than $3 billion in fees to compensate consumers.

The war on junk fees takes center stage

It's not surprising loan providers are going on the offensive against the CFPB.

Under Biden’s administration, the agency has been tasked to get rid of "junk fees"—or pesky hidden charges commonly attached to loans, bank accounts, and credit card transactions.

The CFPB is in the process of finalizing a new rule that would prevent credit card issuers from charging exorbitant late fees, which they’ve exploited for years.

If passed, the new rule could save households more than $10 billion annually just in late fees. That translates into $220 per family.

The agency has also drafted a new rule that could cap bank overdraft fees to $3, which is 90% lower than current fees. The typical American currently pays more than $250 in overdraft fees every year.

Overdraft and late fees have a tendency to hit consumers when they’re already down.

According to research from the Pew Charitable Trust, lower-income households are more likely to pay overdraft fees than the rest of the population.

Of course, not everyone is convinced that targeting “junk fees” is a good idea. I

In fact, some experts say the term is purposely misleading, as junk fees are “often far from arbitrary charges,” according to James Broughel, an economist at the Competitive Enterprise Institute.

“Many of these fees serve important economic functions, such as deterring risky behavior and enabling firms to offer lower upfront prices,” he wrote in a Forbes op-ed.