Is the Funding for the Consumer Financial Protection Bureau Constitutional?

One of the most controversial parts of the solutions to the causes of the Great Recession of 2008 is the Consumer Financial Protection Bureau (CFPB). As you remember, the Great Recession was caused by a housing market crisis and required a huge bailout of banks and AIG by the federal government.

How the CFPB is funded is at issue now and the U.S. Supreme Court is going to decide whether that funding is constitutional. It is currently funded by the Federal Reserve. Attempts by Congress to change the funding cannot happen because of how the law is written.

First some background. After the Great Recession wound down, politicians and consumer advocates felt something needed to be to help with the confusion often experienced by consumers when dealing with home loans and credit cards.

The Consumer Financial Protection Bureau was officially created in 2010 with the passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank as it became known. It put consumer protections that were spread out in various federal agencies into one place and put some new protections in place as well.

The bureau’s founding was controversial and was vehemently opposed by Republicans and conservatives. It’s biggest advocate is — and has always been — Sen. Elizabeth Warren.

In October the President Donald Trump appointed Federal Fifth Circuit Court of Appeals ruled the funding is unconstitutional. In other words, the court found that only Congress has the purse strings for a federal agency.

It’s a decision that Rep. Patrick McHenry — who heads up the House Committee on Financial Services — finds true and important.

“As Republicans have said for years, the CFPB’s unconstitutional funding structure improperly insulates it from Americans’ representatives in Congress,” McHenry said. “Director Chopra is returning the CFPB to its Obama-era regulation by enforcement approach that harms both consumers and our economy.”

He wants stronger oversight of the agency by Congress. Warren is warning against structuring the agency’s funding any way other than the way it was structured by Dodd-Frank.

“Despite years of desperate attacks from Republicans and corporate lobbyists, the constitutionality of the CFPB and its funding structure have been upheld time and time again,” Warren said. “If the Supreme Court follows more than a century of law and historical precedent, it will strike down the Fifth Circuit’s decision before it throws our financial markets and economy into chaos.”

McHenry and the Fifth Circuit Court obviously disagree.

“Congress did not merely cede direct control over the Bureau’s budget by insulating it from annual or other time limited appropriations,” the court said in the ruling. “It also ceded indirect control by providing that the Bureau’s self-determined funding be drawn from a source that is itself outside the appropriations process – a double insulation from Congress’s purse strings that is ‘unprecedented’ across the government.”

Source link: MSN —

Source link: Insurance Journal —

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