Appeals court finds CFPB funding unconstitutional

“Congress’s decision to abdicate its appropriations power under the Constitution, that is, to cede its purse power to the Office, violates the Constitution’s structural separation of powers,” the justices wrote.

The appeals court ruling marked the latest victory for the financial industry, which has fought for years in Congress and in the courts to blunt the reach of the CFPB and limit its ability to police financial services. Republican lawmakers have also worked for years to stifle the CFPB and revamp its structure, arguing that the agency lacks accountability.

“Even among self-funded agencies, the Bureau is unique,” ​​Justice Cory Wilson wrote Wednesday. “The Office’s perpetually self-managed, double-insulated funding structure goes a significant step beyond that enjoyed by the other proposed agencies.

On Wednesday, the CFPB declined to say whether it would appeal the decision to the entire 5th Circuit. CFPB spokesman Sam Gilford said “there is nothing new or unusual about Congress’ decision to fund the CFPB outside of annual expense bills.”

“Other federal financial regulators and the entire Federal Reserve System are funded this way, and programs such as Medicare and Social Security are funded outside of the annual appropriations process,” added Gilford. “The CFPB will continue to carry out its vital work enforcing the nation’s laws and protecting American consumers.”

The Supreme Court ruled in 2020 that another provision of the agency’s structure — a single director who could only be fired for cause, rather than at will, by the president — violated the separation of powers of the Constitution.

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