Federal Court Calls CFPB Structure Unconstitutional

Richard Cordray testifying 1The Consumer and Financial Protection Bureau (CFPB) has been labeled “unconstitutional” by a federal appeals court.  The ruling addressed specifically the agency’s structure and the amount of control exercised by its director – currently Richard Cordray.  The ruling allows for the CFPB to continue to operate.

Circuit Judge Kavanagh opened his opinion with the statement;

“This is a case about executive power and individual liberty. The U.S. Government’s executive power to enforce federal law against private citizens – for example, to bring criminal prosecutions and civil enforcement actions – is essential to societal order and progress, but simultaneously a grave threat to individual liberty.”

The case was based on a review of an order by the CFPB directed at PHH Corporation.

Congressman HensarlingHouse Financial Services Committee Chair Jeb Hensarling, a critic of the CFPB, released a statement on the ruling;

“This is a good day for democracy, economic freedom, due process and the Constitution.  The second highest court in the land has vindicated what House Republicans have said all along, that the CFPB’s structure is unconstitutional. By design, the CFPB is arguably the most powerful and least accountable Washington bureaucracy in American history, and it shows.  The Bureau has infringed on the economic freedoms of consumers, limited their financial choices, increased their costs, and failed to hold managers accountable for widespread discrimination and abuse of its own employees.  This must change.  The CFPB has an important mission. Properly designed and led, it is capable of great good. But the Bureau’s bizarre and defective structure allows it to evade the time-tested checks and balances that are necessary to hold it or any other government bureaucracy accountable.  Our Constitution requires these checks and balances to protect our God-given liberties from government abuse.”

Hensarling said it was astonishing that Dodd-Frank, the legislation that created the CFPB, became law.

Hensarling has been advocating on behalf of new legislation designed to improve financial institution oversight while removing excessive regulations enacted under Dodd-Frank.  The Financial Choice Act, approved by his committee last month, is designed to solve many of the problems created by Dodd-Frank, a law that many believe has institutionalized too big to fail.

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