The news: New Orleans-based 5th U.S. Circuit Court of Appeals ruled the Consumer Financial Protection Bureau’s (CFPB) funding structure unconstitutional, per Banking Dive.
A divided response: In most cases, federal agencies are funded by annual appropriations from Congress. This ruling hinges on the CFPB receiving its funding from the Federal Reserve, which isn’t funded via appropriation. The court’s verdict has essentially stripped the CFPB of its enforcement authority.
The CFPB hasn’t said whether it will appeal the ruling.
How’d we get here? The CFPB has aggressively attempted to rein in the financial sector this year, tackling a full gamut of financial topics.
But the mounting crackdowns have been wearing banks down, and last month a group of industry trade groups united to sue the CFPB for overextending its reach. In that lawsuit, the trade groups questioned the agency’s funding structure.
What’s next? The unconstitutional funding ruling could have broad implications, as it lets banks and other financial institutions push back on the regulatory agency.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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