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CFPB: Will This Dodd-Frank Monstrosity Be Eliminated?

The fate of the federal government’s youngest and most aggressive federal agency, the Consumer Financial Protection Bureau (CFPB), might finally be up for a decision from the Supreme Court.




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The Competitive Enterprise Institute along with The State National Bank of Spring, Texas, and the 60 Plus Association recently filed a petition with the Supreme Court to hear the case State National Bank of Big Spring v. Mnuchin. The Plaintiffs are asking the court whether Title X of Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the CFPB, is constitutional.

The lawsuit’s question is valid. The CFPB was intentionally created to be insulated from oversight by the three branches of government. What’s more, the CFPB’s director can only be removed by the president for specific causes, such as neglect of duty or extreme wrongdoing. This gives the director unilateral control of how to run the agency with restricted oversight from the president.

This feature potentially violates Article II’s “take care clause.” Specifically, that clause says that the president must “take care that the laws be faithfully executed.”

Is It Unconstitutional?

The bureau is also exempt from Congress’ “power of the purse,” and instead receives its funding from the Federal Reserve. That funding arrangement renders the bureau unaccountable to Congress. These parts to the bureau’s structural creation should be enough cause for the courts to rule it unconstitutional.


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This is not the first time that the CFPB has been deemed unconstitutional in the lower courts. In 2016, a District Court stated that the CFPB is “unconstitutionally structured” in PHH V CFPB. And in CFPB V RD Legal Funding, LLC, et al, the U.S. District Court for the Southern District of New York held that the Title X establishment of the CFPB, which constituted it as an “independent bureau,” is unconstitutional.

Since the CFPB’s creation, the bureau has used its obtrusive power to pursue frivolous lawsuits and onerous regulations against numerous financial firms and whole sectors of the financial industry. The American Action Forum found that the CFPB issues regulations 3.5 times faster than any other federal agency. This short regulation rulemaking process has amounted to many slapdash regulations. In fact, the bureau has been forced to make corrections in the Federal Register 25% of the time.

CFPB: Costly Rules

These regulations are costly to the American consumer and to the financial sector. In all, the CFPB has finalized 30 regulations which have created $23.1 billion in regulatory costs requiring more than 24,000,000 paperwork hours for companies to comply. While the rules may be well-intentioned, they have resulted in higher costs and fewer choices for consumers.

However, since Mick Mulvaney was appointed acting director, the CFPB has significantly slowed its rulemaking process and rampant expansion. In a Wall Street Journal op-ed earlier this year, Mulvaney outlined his vision of the CFPB that included instituting a “more formal rulemaking and less regulation by enforcement” policy, bringing the CFPB more in line with other federal agencies.

On this point, Mulvaney has held true. The acting director has lowered the bureau’s budget this year already by 37%, reduced staffing levels, instituted a hiring freeze, and slowed regulation growth. And it looks like there’s more of that to come with Kathy Kraninger’s nomination to serve as CFPB director. Kraninger has noted throughout her Senate Banking hearings that she plans to continue Mulvaney’s reforms.

While the CFPB might be heading in the right direction, the bureau was still created through unconventional, if not unconstitutional, means. It is controlled by a single, all-powerful director, and has minimal control or oversight from Congress. It’s time that the highest court decides if its fundamental existence is justified.

  • Bowers is the managing director at the Center for Consumer Freedom.

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