Federal appeals court rules Congress upended separation of powers in creating CFPB
In May, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit made the decision that President Barack Obama has been illegally overstepping Congress’ powers in creating the Consumer Financial Protection Bureau when he gave it jurisdiction over the nation’s financial markets, a move the D.C. Circuit noted “could, in the eyes of some observers, be considered a circumvention” of Congress’ checks and balances.
“We have not been given any grounds upon which this court may find the statute unconstitutional,” Chief Judge Judith Rogers wrote in an unsigned opinion for the three-judge panel. “The CFPB, therefore, enjoys a clear constitutional footing.”
The decision could change the legal landscape of the agency.
The Consumer Financial Protection Bureau was created by a 2009 law under the Consumer Financial Protection Act and is charged with protecting borrowers in the nation’s financial markets from predatory lenders. While the legislation gave the agency “the power to conduct oversight of the nation’s financial markets and, in particular, to examine, regulate, and supervise the nation’s credit reporting agencies,” it did not give the bureau any enforcement power of its own.
“This Court has held that our responsibility as an Article III court is not to pass judgment on the wisdom or desirability of congressional action, but rather to evaluate whether Congress has exceeded the scope of its constitutional powers,” Rogers wrote.
Congress’ decision to create the CFPB was based on its belief that the new agency would be a more modern, efficient tool than the Federal Reserve, a “central bank” that Congress created and runs, with the help of the president, under the Glass-Steagall Act of 1933.
But many critics of the agency point out its lack of enforcement powers and that, through its rule-making authority, it can change the rules that govern credit reporting in order to protect the consumer.
According to the Wall Street Journal, the decision means that “Consumer Financial Protection Bureau officials will no longer be able to issue regulations that go