March 22, 2023

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Appeals court rules CFPB funding source unconstitutional

Appeals court rules CFPB funding source unconstitutional

This week, the Fifth Circuit of the US Court of Appeals found that the source of funding for Consumer Financial Protection Bureau (CFPB) is unconstitutionalAccording to a decision reached by a panel of three judges.

The committee found that “the CFPB’s design violates the Constitution because it receives funding through the Federal Reserve, rather than the Appropriations Act passed by Congress,” reads a story about Politico’s decision. “Democrats created the structure when they created the CFPB in the Dodd-Frank Act 2010 as a way to protect the office from political pressures that could affect its oversight of the financial industry.”

The commission also eliminated the rule of micro-dollar lending enacted in 2017, which had been targeted by advocates of payday lending.

The plaintiffs, the American Community Financial Services Association and the Texas Consumer Service Alliance, argued that the CFPB’s payday rule was arbitrary and capricious, and overstepped its legal authority.

Prosecutors also challenged the CFPB’s structure, its powers granted by Congress, and the director’s guarantees of impeachment, alleging that they were all unconstitutional.

“Congress’s decision to relinquish appropriation power under the Constitution, that is, to relinquish its fiscal power to the office, violates the structural separation of powers in the Constitution,” the justices wrote.


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The Canadian Capital Protection Board itself has so far declined to say whether it will attempt to appeal the decision. However, a CFPB spokesperson He told Politico The Agency’s ongoing work will remain unaffected for the foreseeable future.

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“[T]”There is nothing new or unusual about Congress’ decision to fund the CFPB outside of annual spending bills,” said CFPB spokesman Sam Gilford. Other federal financial regulators and the entire Federal Reserve system are funded in this way, and programs like Medicare and Social Security are funded outside of the annual appropriations process. The CFPB will continue to do its vital work in enforcing the nation’s laws and protecting American consumers.”

In mid-2020, the United States Supreme Court heard another challenge to the constitutionality of the CFPB and found that while the single-manager structure that removes a particular director from removing the president was unconstitutional, the agency itself will remain intact. This helped prompt President Biden to seek the appointment of his own CFPB director upon entering office, and Similar decision Quickly followed by the Supreme Court related to Federal Housing Finance Agency.

The CFPB currently retains regulatory enforcement authority over independent mortgage banks, depositors, fintech, and the reverse mortgage industry nationwide.

James Kleiman contributed reporting.