The American Consumer Institute issued the following statement from policy analyst Nate Scherer:
In a ruling on Wednesday by the Fifth U.S. Circuit Court of Appeals, a three-judge panel rightly decided that the U.S. Consumer Financial Protection Bureau’s (CFPB) current funding runs afoul of the Constitution’s doctrine of separation of powers.
The Fifth Circuit determined that Congress had unlawfully ceded its power of the purse to the 12-year-old agency by exempting it from the annual legislative appropriations process and allowing it to receive funding directly from the Federal Reserve. While the court did note that some federal regulators are exempt from the appropriations process, the CFPB went well beyond its legal authority by relying on a “double-insulated” funding structure that involves little legislative oversight.
The court’s ruling also throws out a 2017 rule on small dollar loans that short-term lenders say negatively impacts their ability to offer loans to borrowers. These borrowers tend to be overwhelmingly lower-income Americans who lack access to traditional lines of credit. This make’s Wednesday’s ruling all the more important for creating a fairer and more equitable marketplace for all consumers.
The American Consumer Institute applauds this important decision, which pushes back on years of federal overreach in the financial sector. For too long, the CFPB has operated without adequate accountability and has gradually expanded its reach over new areas of the economy to the detriment of credit lenders and consumers. The CFPB must now go through the proper legislative channels to receive appropriations – that’s a win for everyone.