Fifth Circuit Rules that the Consumer Financial Protection Bureau is Unconstitutionally Funded: What Does the Decision Mean?

A unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit has ruled that the manner in which the Consumer Financial Protection Bureau (CFPB) is funded violates the Appropriations Clause of the U.S. Constitution. The CFPB is funded through requests made by the CFPB Director to the Federal Reserve rather than through the Congressional appropriations process.

The case involved a challenge by trade groups to the CFPB’s payday loan rule issued in 2017. The panel also ruled that the trade groups were entitled to have the rule vacated because they were harmed by the Bureau’s use of its unconstitutional funding to promulgate the rule.

The panel’s rulings that the CFPB’s funding mechanism is unconstitutional and that the appropriate remedy for the constitutional violation is to vacate the challenged rule carry enormous potential implications.

After reviewing the decision in detail, our discussion topics will include:

• The CFPB’s options for next steps, including seeking a rehearing en banc or filing a certiorari petition in the U.S. Supreme Court, and likely outcomes

• The decision’s implications for ongoing CFPB activity while review is pending

• If the decision becomes final in its present form, the implications for:

   

  • Final and pending rules and guidance, pending investigations, pending and fully litigated enforcement actions, and final consent orders and consent orders for which court approval is pending
  • CFPB supervisory and other activity
  • Other federal agencies not subject to Congressional appropriations such as the Federal Reserve Board, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation
• Possible legislative fixes (including their possible retroactivity) and the likelihood of bipartisan support

This program is open to Ballard Spahr clients and prospective clients. There is no cost to attend. This program is not eligible for CLE credits.

For more information, contact questions@ballardspahr.com.