by Eric Lendrum
On Wednesday, a federal appeals court determined that the Consumer Financial Protection Bureau (CFPB)’s mechanism for funding is unconstitutional.
Politico reports that the three-judge panel of the U.S. 5th Circuit Court of Appeals ultimately made the ruling based on the fact that the CFPB receives its funding through the Federal Reserve, rather than through legislation from Congress, thus violating the separation of powers in the Constitution dictating that Congress controls the government’s purse strings.
The CFPB was first founded in 2010 after the passage of the Dodd-Frank law, which was ostensibly meant to create a bureau that could be insulated from political pressure from Congress that could affect its ability to oversee the entirety of the finance industry.
“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 judges wrote in their opinion.
“Even among self-funded agencies, the Bureau is unique,” said Judge Cory Wilson. “The Bureau’s perpetual self-directed, double-insulated funding structure goes a significant step further than that enjoyed by the other agencies on offer.”
A CFPB spokesman did not say whether or not the bureau would challenge the ruling, but instead simply said that “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,” said spokesman Sam Gilford. “The CFPB will continue to carry out its vital work enforcing the laws of the nation and protecting American consumers.”
The Supreme Court had previously dealt a structural blow to the CFPB in a 2020 ruling, determining that the fact that the agency’s director could only be fired for cause, rather than at the will of the president, also violated the Constitution’s separation of powers clause.
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Eric Lendrum reports for American Greatness.
Photo “U.S. Capitol” by Ramaz Bluashvili.