GOP Seeks to Subject CFPB to Appropriations Process Following Ruling

Legal experts wonder about future of other federal agencies, including the NCUA, in wake of court decision.

House Republicans say they have a solution to the conundrum caused Wednesday by the U.S. Court of Appeals for the Fifth Circuit when it found that the CFPB was unconstitutionally funded.

In fact, the GOP members say they’ve already introduced a legislative fix.

A three-judge panel of the court ruled Wednesday that the CFPB is unconstitutionally funded because it simply draws money from the Federal Reserve rather than going through the appropriations process.

A key House Republican agreed.

“Bringing the CFPB under the appropriations process would make it more accountable to the American people through their elected representatives,” said Rep. Patrick McHenry, R-N.C., ranking GOP member on the House Financial Services Committee.

He added that the solution to the problem may be found in legislation already introduced by committee Republican, Rep. Andy Barr of Kentucky.

That bill, H.R. 790, introduced by Barr and cosponsored by more than two dozen House Republicans, would simply place the CFPB under the appropriations process.

In the Senate, Sens. John Kennedy, R-La., and Bill Hagerty, R-Tenn., have introduced similar legislation, S. 2790.

Potential Impact on Other Agencies

Meanwhile, some in the legal community are questioning the implications the court ruling has on other federal agencies not subject to the appropriations process, including the NCUA and FDIC. Fees paid by financial institutions fund those agencies.

“While the panel observed that ‘[t]he Bureau’s perpetual self-directed, double-insulated funding structure goes a significant step further than that enjoyed by the other agencies’ and that none of these agencies have enforcement or regulatory authority ‘remotely comparable’ to that of the CFPB, the panel did not provide clear guidance on what ‘the line between a constitutionally and unconstitutionally funded agency may be,’” attorneys at Ballard Spahr wrote, on their Consumer Finance Monitor Blog. “Thus, the decision creates the potential for these other agencies to face Appropriations Clause challenges to actions they take.”

Outcry From Consumer Advocates

Consumer advocates are livid over the ruling.

“This is a lawless and reckless decision,” tweeted Sen. Elizabeth Warren, D-Mass., who is credited with conceiving of the idea for the bureau. The agency “has returned billions of dollars to Americans by doing its job, and its funding is clearly constitutional. Extreme right-wing judges are throwing into question every rule the CFPB enforces to protect consumers and businesses alike.”

Elyse Hicks, consumer policy counsel at Americans for Financial Reform Education Fund, agreed.

“Ever since the CFPB’s creation more than a decade ago, predatory lenders, Wall Street, and big banks have been singularly focused on using whatever tactic they can to undermine and limit its authority,” she said.

The three judges on the appeals court panel all were nominated by former President Trump, an avowed opponent of the agency, added Lauren Saunders, associate director of the National Consumer Law Center.

Saunders said she expects the CFPB to ask the full en banc panel of the Fifth Circuit to review the decision before appealing it to the U.S. Supreme Court.