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.
- In response to the ruling, a CFPB spokesperson pointed out that most financial agencies are financed outside of annual appropriations, such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), and thus the CFPB’s financing structure is not out of the ordinary.
- Democratic lawmakers say the ruling is reckless and puts American consumers at major risk because the ruling may prevent the CFPB from effectively enforcing.
- Republican senators welcomed the ruling, as they believe the CFPB has been enacting radical regulations across the financial sector, hurting consumers and stifling competition.
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.