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October 20, 2022

The Fifth Circuit’s Decision Finding the CFPB Is Unconstitutional and Overturning Its Payday Lending Rule Is Legally Defective

WASHINGTON, D.C.— Dennis Kelleher, Cofounder, President and CEO, issued the following statement in response to the recent decision by the U.S. Court of Appeals for the Fifth Circuit in Community Financial Services Association of America, Ltd. v. Consumer Financial Protection Bureau:

“A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit found that the statutory funding mechanism for the Consumer Financial Protection Bureau (CFPB) violates the Appropriations Clause of the Constitution.  As a result, the Court overturned the CFPB’s payday lending rule protecting consumers from financial predators.  This ruling is legally deficient, as proved by its inconsistency with rulings on the same issue by at least seven other federal courts.

“The Court’s reasoning is largely based on thin metaphors about the power of the “sword” and the “purse” and—in the ultimate analysis—the Court’s palpable discomfort with the mission and authority of the CFBP.  Remarkably, the decision pays almost no attention to the actual text of the Appropriations Clause, which restricts the use of funds “drawn from the Treasury.”  Yet the opinion itself notes that the CFPB is effectively self-funded and “draws” those funds from the Federal Reserve, not the Treasury; self-funding is a common and well-accepted practice among federal agencies.  Moreover, the Court gave insufficient weight to Congress’s deliberate choice of independent funding for the CFPB and the important reasoning underpinning that choice: to partially insulate the agency from the inevitable political and industry pressure that happens when an independent regulator protects consumers against wealthy, powerful and influential financial institutions. Finally, the Court largely assumed that any funding issue must nullify the payday lending rule, even though the Supreme Court has not generally accepted such assumptions for other constitutional issues.

“This decision is but the latest by judges on the Fifth Circuit nullifying actions by financial regulators at the CFPB, SEC, and other federal agencies that shows little if any regard for the considered views of other federal courts.  What Congress actually said or intended and other federal courts’ reasoning seems to matter less and less to the Fifth Circuit, which seems intent on creating a separate body of law based on a pro-corporate, pro-financial industry, anti-consumer ideology masquerading as objective legal analysis.

“The declaration that the CFPB’s funding scheme is unconstitutional must be corrected, either by the full Fifth Circuit or the Supreme Court.  Better Markets fully expects the CFPB to move quickly to ensure this flawed decision does not threaten even more harm to important financial protection rules against unfair, deceptive, and abusive financial practices.”


Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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