WASHINGTON – A federal appeals court has found the US Consumer Financial Protection Bureau to be funded through an unconstitutional method, a ruling that overturned the agency’s decision Regulating payday lenders And dealt a blow to how the agency works.
The ruling, by a three-judge panel of the Fifth U.S. Court of Appeals in New Orleans, found that the CFPB’s funding structure violated the Constitution’s principle of separation of powers, which defines the power of the three branches of government. The court said Congress has the sole power of the Federal Reserve, and the office’s funding structure undermines that power.
When Congress created the CFPB through the Dodd-Frank Financial Reform Act of 2010, it exempted the agency from the annual legislative appropriations process. Instead of Congress reviewing and voting on its budget, the bureau gets its money through transfers from the Federal Reserve, up to a certain cap. The Federal Reserve cannot refuse applications under this cap.
Justice Cory Wilson wrote to the Court: “Congress’s decision to waive the power of appropriation under the Constitution, that is, to cede its power of money to the office, violates the structural separation of powers in the Constitution.” The three judges to the panel were appointed by former President Trump.
While other federal regulators such as the Federal Reserve are also exempt from the annual appropriations process, the judges said the Consumer Bureau’s funding structure “goes a significant step beyond that enjoyed by other agencies.”
CFPB spokesman Sam Gilford questioned the reasoning behind the ruling, saying that other federal financial regulators are being funded outside of annual spending bills, such as programs like Medicare and Social Security. “The US Consumer Protection Board (CFPB) will continue to do its vital work in enforcing the nation’s laws and protecting American consumers,” the spokesperson said.
The Office can ask all active judges of the Court of Appeal to reconsider the decision or it can request review by the Supreme Court.
(More is coming.)
write to Andrew Ackerman at [email protected]
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