CFPB funding unconstitutional
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CFPB Funding Method Found Unconstitutional by Federal Appeals Court
A federal appeals court found the U.S. Consumer Financial Protection Bureau is funded through an unconstitutional method, a ruling that threw out the agency’s regulation on payday lenders and struck a blow against how the agency operates.
The decision, by a three-judge panel of the Fifth U.S. Circuit Court of Appeals in New Orleans, found the CFPB’s funding structure violated the Constitution’s doctrine of separation of powers, which sets the authority of the three branches of government. Congress has the sole power of the federal purse, and the bureau’s funding structure undercuts that authority, the court said.
When Congress created the CFPB through the 2010 Dodd-Frank financial overhaul law, it exempted the agency from the annual legislative appropriations process. Rather than having Congress review and vote on its budget, the bureau gets its money through transfers from the Federal Reserve, up to a certain cap. The Fed can’t turn down requests under that cap.
“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,” Judge Cory Wilson wrote for the court. All three judges on the panel were appointed by former President Donald Trump.
While other federal regulators such as the Fed are also exempt from the annual appropriations process, the judges said the consumer bureau’s funding structure “goes a significant step further than that enjoyed by the other agencies.”
CFPB spokesman Sam Gilford disputed the reasoning behind the ruling, saying other federal financial regulators are funded outside annual spending bills, as are programs such as Medicare and Social Security. “The CFPB will continue to carry out its vital work enforcing the laws of the nation and protecting American consumers,” the spokesman said.
The bureau could ask all the active judges on the appeals court to reconsider the decision or it could seek review by the Supreme Court.
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Couldn’t agree more and one of the reasons I detest Warren.
She literally abhors democracy. Ok, I guess the charitable read is that she thinks Congress is corrupt so she attempts to design agencies (and succeeded once) that are isolated from congressional oversight.
Let’s hope this one sticks.
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Gonna be interesting to see if there is an appeal to SCOTUS. Even if cert is granted, it'll be smacked down.
ETA: " of the reasons I detest Warren"
There's lots of reasons, but this is right up there. Every time I see her, the word "harridan" comes to mind.
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I can’t say I don’t see her point at all. I was at Nasdaq in the late 90s and saw the SEC afraid to do the right thing in many occasions out of fear of someone on the Senate Finance Committee who got a lot of wall street pac funds.
But still - democracy is messy. Like Churchill said, it’s the worst form of government except all the other forms that have been tried.
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Hmm … I thought it was Dodd who favored indirect funding for the CFPB back in the days.
Not enough time to dig deep, but I found Warren’s 2011 testimony to the House Financial Services Committee concerning the CFPB, and there is a sub-section titled “B. Budget” that talks about funding, that includes the following:
“The Dodd-Frank Act followed more than a century of precedent in providing the CFPB with funding outside of the congressional appropriations process. Congress has consistently provided for independent funding for bank supervisors to allow for long-term planning and the execution of complex initiatives and to ensure that banks are examined regularly and thoroughly for both safety and soundness and compliance with the law.”
Haven’t track down which other “bank supervisors” also have funding sources outside of the usual congressional appropriation process.
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The precedent is the Fed and there’s a reason we want that to be independent of the political process.
And yes, DF was the enabling law but she was the one designing it and leading the administration’s effort to craft the law. It was before she was a Senator
