How Congress Should Capitalize on the CFPB Being Ruled Unconstitutional

Earlier this month, the U.S. Court of Appeals for the D.C. Circuit ruled that the Consumer Financial Protection Bureau’s (CFPB) structure violates the Constitution’s separation of powers.

Heritage Foundation Senior Research Fellow in Regulatory Policy Diane Katz writes:

“It would be hard to overstate the importance of the decision by the Circuit Court of Appeals to strike down as unconstitutional the wholly unaccountable structure of the CFPB. As a result, bureau Director Richard Cordray will no longer wield singular control over the entire consumer finance market. The court instead rightfully granted the president the power ‘to remove the director at will, and to supervise and direct the director.’”

Created by the Dodd-Frank Act in 2010, the CFPB is exempt from nearly every form of oversight traditionally applied to federal agencies. The CFPB is ruled by a single director who serves a five-year term and can only be removed from office by the President for “inefficiency, neglect of duty, or malfeasance in office.” Most federal agencies are run by a board supervised by the President.

In addition to a lack of executive oversight, Congress has no ability to keep the agency accountable because the CFPB receives its funding from the Federal Reserve rather than Congress. While the ruling empowers the President to remove the director from office, it does not provide any additional and more important oversight powers to Congress.

Instead of using the ruling as an excuse to do nothing, Congress must capitalize on the ruling by fully repealing the CFPB or at the very least, pass the Financial CHOICE Act, which would restructure the CFPB into a five-member bipartisan commission, subject to congressional oversight and the appropriations process.

The CFPB has failed live up to its name and protect consumers. Instead, it restricts choice and access to credit for consumers, small business owners, and potential homebuyers while bullying mortgage lenders and banks of all sizes into submission. The CFPB’s actions create deep uncertainty in the financial industry and have ripple effects throughout the U.S. economy. It’s time for the CFPB be held accountable to Congress and the American people.

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