What’s going on: The fifth circuit and the CFPB

In the beginning of October we blogged about some spooky Consumer Financial Protection Bureau (CFPB) enforcement actions. Well, later that month the Fifth Circuit Court of Appeals (Fifth Circuit) issued a ruling that caused some to wonder whether or not the CFPB was soon to be a campfire story told to scare new compliance professionals. On October 19, 2022 the Fifth Circuit ruled that the CFPB was unconstitutional and that the 2017 Payday lending rule was therefore vacated. Since the ruling, the compliance team has heard about compliance professionals and credit unions questioning whether or not the CFPB would be abolished because of the ruling and how much weight they should give to CFPB rules/guidance.

What’s All the Fuss About

As I noted above, the Fifth Circuit ruled that the CFPB was unconstitutional. Specifically, the Fifth Circuit found that the funding structure for the CFPB was unconstitutional.

In order to fund the government, Congress has to pass a budget into law. This budget funds the various government agencies such as the Department of Defense, IRS, and the National Park Service. However, when Congress established the CFPB, they bypassed the congressional budget process and the CFPB was funded through the Federal Reserve and would continue to be funded without the need to be put into Congress’ “budget.” Sort of like setting up an automatic recurring payment, where instead of paying for Netflix, it’s a government agency.


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