In a setback for President Obama, a federal appeals court curtailed the power of the Consumer Financial Protection Bureau, ruling Tuesday that the agency championed by Sen. Elizabeth Warren of Massachusetts violated the Constitution with a structure that gives too much unelected authority to its sole director.
The highly anticipated ruling by the U.S. Court of Appeals for the District of Columbia Circuit said the consumer watchdog agency, forged by Democrats five years ago, violates the Constitution’s separation of powers and was an example of a “gross departure from settled historical practice.”
The court said the CFPB director had “massive” power, with more unilateral authority than any single officer in the three branches of the federal government, aside from the president.
“The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices,” the court said. “The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law.”
Given the historical precedent of independent agencies being headed by multiple commissioners or board members, and in light of the threat to individual liberty posed by a single-director independent agency, the court said, “We therefore hold that the CFPB is unconstitutionally structured.”