U.S. Senator Elizabeth Warren (D.Massachusetts), who was instrumental to the formation of Consumer Financial Protection Bureau before joining the Senate, blasted an earlier this week appeals court ruling that the funding mechanism for this agency is unconstitutional.
The CFPB is charged with creating rules and regulations to govern the financial sector. According to its website, the agency is “dedicated to making sure you are treated fairly by banks, lenders and other financial institutions.”
Wednesday saw a panel of three judges representing the 5th U.S. Circuit Court of Appeals ruled on a case brought forward from a payday lending company. the agency has an unconstitutional funding mechanismBecause its budget is funded by the Federal Reserve and not through appropriations made by Congress,
“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.
The ruling, if allowed to stand, would essentially sideline the CFPB, making it nearly impossible for it to function unless Congress — likely too bitterly divided to agree on a solution — changes how the agency is funded.
All three panel members were appointees of former President Donald Trump. Notably, one of the judges who took part in the case — Judge Cory Wilson — also received thousands of dollars from Wall Street bankersWhen he was a candidate in 2018 for political office
The CFPB did not say how it planned to react to the ruling, but it’s likely that an appeal is imminent, either to the entire 5th U.S. Circuit Court or directly to Supreme Court. Officials of the agency strongly disagreed with this ruling, noting that similar funds can be received by other agencies.
“There is nothing novel or unusual about Congress’s decision to fund the CFPB outside of annual spending bills,” agency spokesperson Sam Gilford said.
Other financial agencies — including the Federal Deposit Insurance Corporation and the Federal Housing Finance Agency — are like the CFPB in that they do not rely on regular appropriations from Congress in order to operate. The 5th Circuit panel’s decision also goes against previous Supreme Court decisions.
The Constitution does not prohibit Congress from funding agencies in many ways. Congress could provide funding for an agency through an annual appropriation or a five-year or 500-year appropriation. It could also authorize the agency’s collection of fines or fees in order to fund its operations.
Warren crafted the ideaFor the CFPB in 2007 six years before becoming a U.S. Senator. Warren condemned the 5th Circuit ruling.
“This is a lawless and reckless decision,” Warren tweeted. “@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.”