The Consumer Financial Protection Bureau's Lack of Candor to the Court, Continued

By Adam J. White Yale Journal on Regulation February 03, 2023

Having closely followed the Consumer Financial Protection Bureau since its inception, I’m struck by the arguments that the CFPB is now making to the Supreme Court. After all, they squarely contradict a decade’s worth of the CFPB’s own statements. I’ve detailed that on Notice & Comment and elsewhere, but here is one more example, involving a 2016 brief that the CFPB filed with the Government Accountability Office.

As I sketched out in an earlier post, the Dodd-Frank Act perpetually empowers the CFPB to claim nearly $1 billion dollars from the Federal Reserve annually, funds that would otherwise revert to the U.S. Treasury. All of this is a function not of appropriations laws, but of the Dodd-Frank Act of 2011, and it poses a real problem under the Constitution, which requires that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” 

As I suggested in my earlier post, this grant of perpetual power for the CFPB to fully fund itself seems an outright delegation of Congress’s power of the purse, allowing it to spend Treasury funds without appropriations by law.........To Read More...

How the U.S. Supreme Court Will Decide the Threat to CFPB’s Funding and Structure: Part I - The eyes of the consumer finance world are now on the Supreme Court as it decides whether to grant the CFPB’s certiorari petition in CFSA v. CFPB. In the decision, a Fifth Circuit panel held the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution. We first review the background of CFSA’s lawsuit, the mechanism through which the CFPB is funded, and Congress’s policy rationale for the mechanism. We then examine the reasoning behind the Fifth Circuit’s conclusion that the funding mechanism is unconstitutional, the CFPB’s strategy in response to the decision, and the issues CFSA is expected to raise in a cross-petition for certiorari............

How the U.S. Supreme Court Will Decide the Threat to the CFPB’s Funding and Structure: Part II - The eyes of the consumer finance world are now on the Supreme Court as it decides whether to grant the CFPB’s certiorari petition in Consumer Financial Services Association Ltd. v. CFPB. In the decision, a Fifth Circuit panel held the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution................. 

Appeals court finds CFPB funding unconstitutional

A three-judge panel of the 5th U.S. Circuit Court of Appeals ruled in a case brought by a payday lending group against the CFPB's 2017 payday lending rule.

 

By Katy O'Donnel 10/19/2022 

An appeals court on Wednesday ruled that the Consumer Financial Protection Bureau’s funding mechanism is unconstitutional, in a victory for lenders that have targeted the agency’s structure in a years-long bid to tamp down regulation.

A three-judge panel of the 5th U.S. Circuit Court of Appeals ruled that the design of the CFPB violated the Constitution because it receives funding through the Federal Reserve, rather than appropriations legislation passed by Congress. Democrats established the structure when they created the CFPB in the 2010 Dodd-Frank law as a way to shield the bureau from political pressures that could impact its oversight of the finance industry............“Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers,” the judges wrote...........The Supreme Court in 2020 ruled 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 Constitution’s separation of powers............To Read More....

Consumer Financial Protection Gone Awry

By Star Parker April 13, 2022 

The crises of recent years tend to erase from memory those that preceded them. One, as you may recall, was the financial collapse of 2008 -- a collapse deemed by many as the worst since the Great Depression. That collapse swept into power a government like the one we have now -- the White House and both houses of Congress controlled by Democrats...............Indeed, the new Democrat administration followed this advice and used the financial crisis as an opportunity for a major expansion of government.

Democrats wasted no time to ascribe the financial collapse to business greed and insufficient regulation of banks and other financial institutions. In 2010, the 2,300-page Dodd-Frank Act was passed -- with no Republican votes in the House and three in the Senate -- adding 400 new regulations on financial institutions. Included in this tsunami of new financial regulation was the creation of a new independent agency -- the Consumer Financial Protection Bureau............ Now our financial institutions -- banks, securities firms, credit unions, payday lenders, etc. -- fall under the purview of the Consumer Financial Protection Bureau and must submit to its scrutiny and oversight.

The CFPB has just announced sweeping new changes in its "supervisory operations to better protect families and communities from illegal discrimination"  Firms must make available to CFPB "their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups."...........Can a government bureaucrat really determine why a banker did or did not make a loan, and should the heavy hand of government be involved here?..............By 2008, according to Wallison, just before everything collapsed, "More than a majority of all mortgages in the U.S. financial system was sub-prime, required low or no down payment, or were otherwise risky.".............Today, Democrats are back at it.

CFPB Director Rohit Chopra is gearing up to use his almost unilateral power to show he knows better than business and the marketplace what is good for consumers..........To Read More..