Consumer Financial Protection Bureau

What Could the Fifth Circuit Decision Mean for the Future of the CFPB?

By: Rachel Gittleman, Financial Services Outreach Manager

The Consumer Financial Protection Bureau (CFPB) was born out of a lesson learned the hard way.  A lack of regulatory safeguards led to the 2008 financial crisis, which left 21 million Americans without work and more than nine million families without homes due to foreclosure or short sales. In the aftermath of the financial crisis, Congress passed the critical Dodd-Frank law which created the CFPB and charged it with enforcing federal consumer financial law. The CFPB was tasked with promoting financial stability, improving accountability and transparency in the financial marketplace, and protecting consumers from unfair, deceptive and abusive financial practices and from unlawful discrimination.

Since its inception, the CFPB has protected consumers from predatory actors across marketplaces and served as the only financial agency specifically focused on consumers. The CFPB has returned $13.5 billion to the pockets of 175 million consumers who have been harmed by unlawful business practices and ordered corporate wrongdoers to pay $1.8 billion in civil penalties. 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.

It 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. The CFPB has educated consumers about how to apply for financial products, spot risky practices, and exercise their rights in the financial marketplace. It has provided critical research about how payday loans create a cycle of debt, overdraft practices disproportionately harm low-income consumers, students are targeted by unsafe and deceptive products, and service members and their families face unique harms in the financial marketplace. This is just a sampling of the critically important work the CFPB has accomplished over the last decade to make the financial marketplace more competitive, equitable, fair, and safe.

The CFPB is critically important to American consumers and to the economy as a whole. Yet last week, the Fifth Circuit Court of Appeals ruled that the CFPB’s independent funding structures are unconstitutional. The CFPB’s funding is not novel—the Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Federal Housing Finance Agency, National Credit Union Administration, and Medicare and Social Security are all funded outside of Congressional appropriations. Independent funding protects these critical agencies and programs from falling prey to political influence and partisan gamesmanship that so often plagues the appropriations process.

This ruling calls into question the CFPB’s ability to ensure that debt collectors, payday lenders, mortgage and student loan servicers, credit and tenant reporting agencies, and big banks follow the law. It creates momentous uncertainty for existing regulations, supervision, and enforcement, as well as for other agencies and programs that are independently funded and vital to the American economy and consumers. Not only does this decision have widespread consequences for consumers, but it creates unprecedented uncertainty for regulated entities in the financial marketplace.

This decision threatens consumers and our economy at a time when all consumers are dealing with the ongoing COVID-19 pandemic, record inflation and soaring prices, and housing shortages. This is not the time for federal financial regulators like the CFPB to be undermined or attacked.

We will not stop until this ruling is overturned. We will continue to support the CFPB’s fight for a financial marketplace that is equitable, fair, transparent, and competitive for all American consumers. We will continue to advocate for a CFPB that has the independence and resources needed to do its job.