CFPB Responds to 5th Circuit’s Decision—But in a Different Case

Several groups with pending enforcement actions from the CFPB are challenging those filings after the 5th Circuit ruled the bureau’s funding is unconstitutional. The CFPB fired back to one of those, stating the 5th Circuit’s decision should not apply and that it lacks support of law.

10/27/2022 2:00 P.M.

2.5 minute read

The Consumer Financial Protection Bureau has responded to a request to dismiss an enforcement action from TransUnion, signaling its stance on challenges to the constitutionality of the bureau’s funding structure.

Last week, the 5th Circuit ruled in Community Financial Services Association of America Ltd. v. CFPB that the CFPB’s funding through the Federal Reserve rather than congressional appropriations violates the U.S. Constitution’s separation of powers, ACA International previously reported.

Since the decision, several groups with pending enforcement actions from the bureau filed for dismissal, citing the decision from the 5th Circuit.

TransUnion is challenging the bureau’s allegations in CFPB v. TransUnion that it violated a consent order from 2017. TransUnion argues that the CFPB’s consent order cannot be enforced because it “used unappropriated funds to negotiate and prepare it,” according to the report.

The CFPB filed a response this week, stating the 5th Circuit’s decision “does not help” the defendants in their case.

“The Fifth Circuit panel thought that Congress violated the Appropriations Clause and the separation of powers when it passed a law authorizing the Bureau to spend money. That decision is neither controlling nor correct,” the CFPB said in its response to TransUnion, in a case in the U.S. District Court for the Northern District of Illinois-Eastern Division.

It counters TransUnion’s argument on funding by stating that the bureau’s “spending is validly authorized by the Consumer Financial Protection Act. When it established the [b]ureau within the Federal Reserve System, Congress authorized the Bureau to draw and spend on its operations up to a capped amount of funds each year from the combined earnings of the [s]ystem.”

The CFPB largely focuses on the 5th Circuit’s recent decision in its response to TransUnion, stating it “is without support in law” and does not “make sense.”

“The court mustered no case from more than 230 years of constitutional history that has ever held that Congress violates the Appropriations Clause or separation of powers when it authorizes spending by statute, as it did for the [b]ureau,” the CFPB says.

Concluding its argument against TransUnion’s request for dismissal, the CFPB called for the court to reject the 5th Circuit’s reasoning and “instead join every other court to address the issue—including the en banc D.C. Circuit—in upholding the Bureau’s statutory funding mechanism.”

The CFPB said regardless of the court’s stance on the 5th Circuit decision, it should still deny the request to dismiss from TransUnion “because any defect in the [b]ureau’s funding authorization (and there is none) would not deprive the [b]ureau of the power to carry out the responsibilities given it by Congress to enforce the law.”

Bloomberg Law reports the CFPB released a statement that it “will continue to carry out its statutory mission enforcing federal law and protecting Americans from predatory financial institutions. Illegal practices are still illegal, and the CFPB is going to hold companies accountable when they break the law.”

Related Content from ACA International:

5th Circuit’s CFPB Decision Brings Challenges to Enforcement Actions

ACA International Responds to Court Decision on CFPB Funding Structure

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.




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