Constitutional Law

Funding structure for consumer agency violates separation of powers, 5th Circuit says

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5th Circuit Court building Wikimedia Commons

Photo by Infrogmation, CC-BY-SA-3.0, via Wikimedia Commons.

A federal appeals court has ruled that the funding structure for the Consumer Financial Protection Bureau is unconstitutional because it is funded by the Federal Reserve System, rather than Congress.

The 5th U.S. Circuit Court of Appeals at New Orleans ruled Wednesday that the arrangement—intended to insulate the CFPB from politics—violates separation of powers.

Law360, Reuters, NPR and Politico are among the publications with coverage.

Judge Cory T. Wilson, an appointee of former President Donald Trump, wrote the Oct. 19 opinion. Other judges on the panel, Judge Kurt D. Engelhardt and Judge Don R. Willett, are also Trump appointees.

“Wherever the line between a constitutionally and unconstitutionally funded agency may be, this unprecedented arrangement crosses it,” Wilson wrote.

The appeals court decision vacated a regulation of the CFPB challenged by trade groups for payday lenders. At issue was a provision that bars more than two attempts to withdraw loan repayments from consumers’ accounts, absent additional authorization, according to

The case is Community Financial Services Association of America v. Consumer Financial Protection Bureau.

The U.S. Supreme Court cited separation-of-powers principles when it struck down another aspect of the CFPB’s structure in a June 2020 opinion. The Supreme Court said it was unconstitutional to concentrate the agency’s power in a single director who is removable only for cause.

But the Supreme Court said the removal provision could be severed from the rest of the law creating the agency, leaving the CFPB intact with a director who could be removed at will by the president.

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