By Bronson Winslow
A federal appeals court ruled Wednesday that the Consumer Financial Protection Bureau’s (CFPB) method of funding is unconstitutional under the premise that it bypasses Congress, directly pulling funding from the Federal Reserve.
A three-judge panel of the 5th U.S. Circuit Court ruled that the CFPB lacks significant methods of accountability and violates the Constitution’s separation of powers, arguing that Congress unconstitutionally ceded its power of the purse to the Bureau in 2011, according to the court ruling. The CFPB was formed as a result of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 and was the brainchild of Democratic Massachusetts Sen. Elizabeth Warren, who helped establish the bureau.
“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,” the ruling read. (RELATED: EXCLUSIVE: Biden Admin Hit With Lawsuit For Allegedly Hiding Records On ‘Hostile Takeover’ Of Key Regulator)
The panel of judges also ruled against a small-dollar lending policy that governed payday, vehicle title and certain high-cost installment loans, according to the ruling.
The CFPB is funded through the Federal Reserve rather than annual appropriations legislation, like most other federal agencies. This funding mechanism was designed to protect the regulator from the whims of democratically-elected politicians.
“There is nothing novel or unusual about Congress’s decision to fund the CFPB outside of annual spending bills. Other federal financial regulators and the entire Federal Reserve System are funded that way, and programs such as Medicare and Social Security are funded outside of the annual appropriations process. The CFPB will continue to carry out its vital work enforcing the laws of the nation and protecting American consumers,” CFPB spokesperson Sam Gilford said, according to Politico.
Unlike the Federal Reserve, which has to return money it makes above a certain threshold to taxpayers, the CFPB can keep its accumulated funding.
This is a lawless and reckless decision. @CFPB has returned billions of dollars to Americans by doing its job, and its funding is clearly constitutional. Extreme right-wing judges are throwing into question every rule the CFPB enforces to protect consumers and businesses alike. https://t.co/rktOfC46R5
— Elizabeth Warren (@SenWarren) October 19, 2022
Warren opposed the court decision, describing it as “reckless.”
The agency can ask for rehearing of Wednesday’s decision by the full 5th Circuit Court, which may or may not rehear the case. Then, it can seek review from the U.S. Supreme Court. The CFPB did not immediately respond to the Daily Caller News Foundation’s request for comment.
