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It's primary gimmick is the following: it isn't dependent on funding from US Congress. At one time, it even used to be independent of the US Executive Branch until a court ruling in 2016 that the US President could fire the head of the agency.
A three-judge panel on the 5th Circuit Federal Court of Appeals ruled this week that the CFPB's structure is unconstitutional because Congress has no control over the agency's budget, which is funded entirely by the Federal Reserve. Under the terms of Dodd-Frank, the CFPB is entitled to receive a budget totaling up to 12 percent of the Federal Reserve's annual operating expenses, and the Federal Reserve is not allowed to refuse the CFPB's requests for funding.
Now, that funding model has been used to reverse a ruling by the CFPB as unconstitutional with the potential to put all its rulings since formation into question on the same constitutional basis.
Why it matters: The reasoning behind the ruling, if upheld, could potentially invalidate all the rules enacted by the CFPB over its 11-year existence — including regulations underpinning the U.S. mortgage system.
This is one of the big reasons I oppose the passing of bad law even when it serves a concrete good. It can take a long time to fix the massive problems that such law brings.
And note that a key argument by the court was that there was no precedent for the CFPB's unconstitutional structure. If there had been other agencies with similar setups, this could have been very hard to overturn. Similarly, the CFPB is a precedent for future breaking of the US Constitution along these lines. Without the ruling, there would have been a stronger case for future misdeeds of this sort.
(Score: 0) by Anonymous Coward on Sunday October 23 2022, @06:27AM
Future Congresses are limited by their willingness to pass laws that amend or repeal the original law authorizing the funding. The fact that future Congresses have not yet chosen to reconsider funding for the CFPB does not mean that the funding mechanism is improper.
The Constitution was not intended to require every Congress to authorize every appropriation. In fact, Article I does explicitly require that every Congress authorize one, and only one, particular type of appropriation:
This explicitly requires that every Congress must authorize appropriations to support armies. This is also the only such restriction in Article I. If the Constitution was intended to require that every Congress would have to authorize other types of appropriation, we can reasonably conclude that it would have been explicitly stated in Article I.
You could certainly argue that Congress has delegated too much of its authority to the Executive Branch, and that this is poor governing. I would even agree to a large extent about this, in particular with matters like the use of military force. But poor governing is not inherently unconstitutional, just poor governing. The fact that the current Congress has not voted on appropriations to authorize the CFPB does not mean that it is unconstitutional. If the Constitution was intended to require that every Congress vote on these types of appropriations, this would have explicitly been stated in Sections 8 or 9 of Article 1.
In my previous post, I cited a specific example of Congress delegating its authority over appropriations without further direct oversight by Congress. That law did not violate the Constitution. Neither does the law authorizing the CFPB.