In October 2022, the United States Court of Appeals for the Fifth Circuit ruled that the Consumer Financial Protection Bureau’s (CFPB) independent funding structure violates the U.S. Constitution’s Appropriations clause and the principle of separation of powers. The Dodd-Frank Act, passed in the wake of the 2008 financial crisis, provided that the CFPB would not be funded through Congressional appropriations. Instead, the CFPB receives its funding directly from the Federal Reserve, which is also funded outside the congressional appropriations process. In Community Financial Services Association of America Ltd v. CFPB, two trade associations brought a lawsuit against the CFPB to challenge its 2017 Payday Lending Rule. Broadly speaking, the Rule governs certain personal loans with short-term or balloon payment structures. It (1) requires lenders to choose between two ability-to-repay underwriting methodologies; (2) requires lenders to report and obtain information about a consumer’s financial obligations and borrowing history from certain consumer reporting agencies; What a Recent Court Decision and Challenges to the CFPB Mean for West Virginia Banks By Nicholas P. Mooney II Spilman Thomas & Battle, PLLC wvbankers.org 8 West Virginia Banker
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