Republicans Should Use the Fifth Circuit's CFPB Ruling to Dismantle the Bureau For Good

AP Photo/Jacquelyn Martin

As my colleague Nick covered last Wednesday, the Fifth Circuit Court of Appeals found that the funding mechanism for the Consumer Financial Protection Bureau (CFPB) is unconstitutional in a ruling throwing out the agency’s regulation on payday lenders.


The decision, by a three-judge panel of the Fifth U.S. Circuit Court of Appeals in New Orleans, found the CFPB’s funding structure violated the Constitution’s doctrine of separation of powers, which sets the authority of the three branches of government. Congress has the sole power of the federal purse, and the bureau’s funding structure undercuts that authority, the court said.

As Nick also wrote, the ruling did not make Sen. Elizabeth Warren (D-MA) happy. Perhaps even more impacted is Rohit Chopra, Biden’s CFPB Director and Warren protégé who has an ambitious agenda and has been working behind the scenes to massively expand the regulatory state. When Warren and her allies set up the bureau, they deliberately set it up with this funding mechanism to insulate it from oversight, and Chopra’s the director she’s been waiting for since the beginning, to shepherd her radical, socialist overhaul of the country’s financial services industry — and they have a very broad view of what should be considered part of the financial services industry. Chopra and Warren also have a broad view of the width of the CFPB’s “lane.”

For example, as I wrote a few months ago:

In late May, the CFPB announced the establishment of the Office of Competition and Innovation, through which they’re starting to regulate and enforce competition/antitrust matters — which is really the FTC’s lane, but it enables Chopra to advance a policy and narrative that Biden and people like Sen. Amy Klobuchar are pushing — that the solution for the country’s out-of-control inflation is to ramp up antitrust/competition enforcement and expand its scope.


Chopra’s also been a fan of canceling student loan debt. In testimony before Congress in 2019,

“He criticized the federal government for enabling financial institutions to ‘aggressively pursue borrowers by slamming their credit, levying hefty fees, and even humiliating them with their employer through wage garnishments.'”

He’s also participated in recent White House meetings related to the plan to cancel student loan debt.

Wednesday’s ruling could also affect the student loan cancellation scheme, given its funding mechanism. As Ed Morrissey wrote at Hot Air Thursday morning:

“However, it’s not the only example of such arrogance. In August, Joe Biden announced that he would unilaterally forgive student loans, committing several hundred billion dollars to buying it out without any authorization or appropriation from Congress. This decision sends a shot across Biden’s bow on his Academia bailout, especially since at least one of the lawsuits against it will take place in the Fifth Circuit’s jurisdiction in Texas.”

Sure enough, there were plenty of developments later Thursday and on Friday on that front. After Supreme Court Justice Amy Coney Barrett denied a Wisconsin taxpayer association’s request for an injunction pending appeal in a case challenging Biden’s Executive Order on Thursday, the Eighth Circuit Court of Appeals on Friday issued an administrative stay in separate case, preventing the administration from moving forward with its plans. In that case,


“U.S. District Judge Henry Autrey in St. Louis ruled…that while the six Republican-led states had raised “important and significant challenges to the debt relief plan,” he threw out their lawsuit on grounds they lacked the necessary legal standing to pursue the case.”

Again, as Ed Morrissey writes:

Judge Cory Wilson’s logic in dismantling the CFPB’s autonomy clearly applies directly to the core issue in Biden’s loan-forgiveness plan:

“Drawing on the British experience, the Framers carefully separate[d] the ‘purse’ from the ‘sword’ by assigning to Congress and Congress alone the power of the purse.” Tex. Educ. Agency v. U.S. Dep’t of Educ., 992 F.3d 350, 362 (5th Cir. 2021). 8 The Framers’ reasoning was twofold. First, they viewed Congress’s exclusive “power over the purse” as an indispensable check on ‘the overgrown prerogatives of the other branches of the government.’ The Federalist No. 58 (J. Madison). Indeed, ‘the separation of purse and sword was the Federalists’ strongest rejoinder to Anti-Federalist fears of a tyrannical president.’ Josh Chafetz, Congress’s Constitution, Legislative Authority and the Separation of Powers 57 (2017)

“The Framers also believed that vesting Congress with control over fiscal matters was the best means of ensuring transparency and accountability to the people.”

Judge Wilson’s given plaintiffs who challenge the Biden student loan bailout a roadmap of the argument to make, particularly those plaintiffs whose challenges will be heard in the Fifth Circuit.


As wonderful as it is that Wednesdays ruling may (should) have the secondary effect of torching the student loan bailout, Republicans need to keep their eye on Chopra and the CFPB and do more than clip its wings. Chopra’s still working overtime to overregulate.

The US Consumer Financial Protection Bureau released a sweeping report warning that the burgeoning “buy now, pay later” industry needs fresh regulation to address industry practices.

CFPB Director Rohit Chopra said he’s ordered staff to identify surveillance policies in the industry that need to be curtailed, including the collection of consumers’ purchase and demographic data for targeted ads. Buy-now, pay-later providers will also have to undergo supervisory examinations similar to those applied to credit-card companies.

Chopra’s still exerting outsized influence at FTC and FDIC, especially in the areas of antitrust and merger – areas in which even liberal economists like former Treasury Secretary Larry Summers disagree with his stance.

Validated by the Fifth Circuit ruling, Republicans in the next Congress (where they’ll hopefully have a majority) need to, at a minimum, bring CFPB under the appropriations process. Both Sen. Pat Toomey (R-PA) and Rep. Patrick McHenry (R-NC), ranking members of the Financial Services Committees, have signaled that will happen. McHenry stated Thursday:


“As Republicans have said all along, the CFPB’s ‘double-insulated,’ independent funding mechanism is unconstitutional and makes it wholly unaccountable. I’m glad to see the 5th Circuit recognize this fact. Bringing the CFPB under the appropriations process would make it more accountable to the American people through their elected representatives. The Financial Services Committee must consider Congressman Barr’s TABS Act immediately to give the Bureau certainty regarding its funding.”

In my opinion, the best thing to do with its funding is to cut it altogether, as the bureau itself is unnecessary. If it’s around much longer any efforts to ditch it will be likened to ditching Social Security or the Department of Education.


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