Last week, Director Rohit Chopra of the Consumer Financial Protection Bureau (CFPB or “the Bureau”) testified before Congress to provide the CFPB’s semi-annual report. This meeting was pressing as the Director and many members of Congress discussed the critical ways the CFPB supports consumers, businesses, and the economy, while CFPB is facing an uncertain future.  

In October, the Fifth Circuit Court ruled that the funding mechanism for the Consumer Financial Protection Bureau was unconstitutional. The CFPB, like many other agencies, is funded outside the traditional budget process overseen by Congress. Ruling this outside funding process unconstitutional is a departure from previous judicial decisions, all of which ruled in favor of the current funding mechanism. On November 14, the CFPB filed a petition with the Supreme Court asking the Supreme Court to hear the CFPB’s appeal and hopefully preserve the agency’s current funding process. 

Why Does the CFPB Matter? 

Founded in 2010, the CFPB was established by Congress in response to the Great Recession to protect consumers. Creating the CFPB placed consumer protection in financial services under one roof and allowed CFPB  to supervise, regulate, enforce, and educate financial institutions and the public. Since its conception, the CFPB has returned $13.5 billion to the pockets of 175 million consumers harmed by unlawful business practices and ordered corporate wrongdoers to pay $1.8 billion in civil penalties.  

Additionally, the Bureau has fought discrimination in the banking, credit, and housing marketplaces, protecting consumers from being denied services or charged higher rates because of their race, sexuality, gender identity, or national origin. It has issued rules and guidance to make the credit reporting, debt collection, mortgage servicing, credit card, and banking industries more transparent, equitable, and accountable to the public. 

The CFPB provides financial stability to both families and businesses. If the CFPB ceased to exist, overturning regulations and settled expectations of both lenders and consumers would create substantial uncertainty in the housing market, disrupting the health of the American economy and the financial wellbeing of all involved parties. The Mortgage Banking Association, National Association of Home Builders, and the National Association of Realtors have jointly stated that ruling CFPB unconstitutional would cause devastating damage to not only the financial real estate industry, home building industry, and many related markets, but to the overall economy as well.  

A Flawed Decision 

The Fifth Circuit’s decision is that the funding mechanism for CFPB, as legislated by the Dodd-Frank Wall Street and Consumer Protection Act of 2010, is unconstitutional. Through this Act, Congress tasked the Federal Reserve with providing funds to the CFPB, which means Congress specifically legislated its funding to happen outside of the general budget process.  Fundamentally, the Fifth Circuit's decision is flawed.  

Notably, the CFPB is one of many agencies funded this way. Others with independent funding include: the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, the National Credit Union Administration, the Centers for Medicare and Medicaid Services, and the Social Security Administration. These agencies all have critical missions to fulfill, and Congress has recognized that submitting their function to the variable partisan budget process is not prudent.  

The CFPB provides critical support to businesses and consumers alike. Dismantling it would put families, employers, and the economy at unnecessary risk. It is in the best interest of our collective economic wellbeing for the CFPB to remain well supported and independently funded. Join Prosperity Now’s Financial Security Network to join the effort to protect consumers: https://prosperitynow.org/get-involved/financial-security-network