The funding stream for the Consumer Financial Protection Bureau (CFPB), created by Congress and approved by then-President Barack Obama in 2008, is unconstitutional, a U.S. appeals court ruled on Oct. 19.
The bureau, which has a mission to implement and enforce federal consumer finance law, was given the power to oversee 18 federal laws, ranging from those covering credit cards to student loans. It is funded by the Federal Reserve, as opposed to the typical funding stream of periodic congressional appropriations.
That mechanism violates the U.S. Constitution’s Appropriations Clause, which outlines the separation of powers into three branches of government, plaintiffs said.
The U.S. Court of Appeals for the Fifth Circuit agreed, noting that the Federal Reserve is also outside of the normal appropriations process, and that the bureau holds its money in a fund that is permanently available to the bureau’s director.
“So the Bureau’s funding is double-insulated on the front end from Congress’s appropriations power. And Congress relinquished its jurisdiction to review agency funding on the back end. In between, Congress gave the Director its purse containing an off-books charge card that rings up'[un]appropriated monies.’ Wherever the line between a constitutionally and unconstitutionally funded agency may be, this unprecedented arrangement crosses it,” U.S. Circuit Judge Cory Wilson, a Trump appointee, wrote for the majority of the appeals court panel in a 39-page ruling.
“The Bureau’s perpetual insulation from Congress’s appropriations power, including the express exemption from congressional review of its funding, renders the Bureau ‘no longer dependent and, as a result, no longer accountable’ to Congress and, ultimately, to the people. By abandoning its ‘most complete and effectual’ check on ‘the overgrown prerogatives of the other branches of the government’—indeed, by enabling them in the Bureau’s case—Congress ran afoul of the separation of powers embodied in the Appropriations Clause.”
The 3–0 decision was joined by Circuit Judges Don Willett and Kurt Engelhardt, both Trump appointees.
The panel partially reversed a ruling from a lower court, which had dismissed the case.
A CFPB spokesperson told The Epoch Times via email that the agency’s funding mechanism is not “novel or unusual.”
“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. The CFPB will continue to carry out its vital work enforcing the laws of the nation and protecting American consumers,” the spokesperson added.
The Community Financial Services Association of America, the lead plaintiff, did not respond to a request for comment.
Sen. Elizabeth Warren (D-Mass.), who helped craft the legislation that created the CFPB, said in a statement that the ruling was “lawless and reckless” and could stop the bureau from enforcing rules.
But others cheered the decision.
“This is a win for the basic proposition that laws ought to be written by people who can be hired and fired on Election Day,” Sen. Ben Sasse (R-Neb.) said in a statement. “This decision is simple: The CFPB’s funding structure created a fourth branch of government that’s not accountable to Congress. That’s just not how self-government works. This straightforward decision is a win for the rule of law.”