Elizabeth Warren slams decision that watchdog overseeing student loans is illegal

  • A federal appeals court ruled funding for the Consumer Financial Protection Bureau unconstitutional.
  • The agency currently receives funding from the Federal Reserve rather than Congress.
  • Senator Elizabeth Warren, who helped set up the agency, called the decision “a reckless move.”

A Republican-shaped court has just ruled against a key Massachusetts consumer agency Senator Elizabeth Warren helped shape.

On Wednesday, the Fifth Circuit Court of Appeals ruled that the Consumer Financial Protection Bureau’s (CFPB) funding structure was unconstitutional because the Federal Reserve funds the agency, rather than requiring approval of funding by congressional legislation.

Under former President Barack Obama, Warren helped create the CFPB with the key idea that it would operate as an independent agency without political influence so it could provide as effective oversight as possible, and that decision could fundamentally change that.

“This is an anarchic and reckless decision,” Warren wrote on Twitter. “@CFPB returned billions of dollars to Americans doing its job, and its funding is clearly constitutional. Far-right judges are questioning every rule the CFPB enforces to protect consumers and businesses.”

“This reckless decision could prevent the CFPB from enforcing rules that prevent debt collectors from harassing you,” she added. “Rules to prevent banks from opening fake accounts or closing your account without asking. Rules to prevent financial companies from charging you exorbitant junk fees.”

A panel of three Fifth Circuit judges – all appointed by former President Donald Trump – wrote in a ruling that “Congress has not simply ceded direct control over the Bureau’s budget by isolating it from annual appropriations or other time-limited appropriations. He also ceded indirect control by providing that self-determined funding for the Office comes from a source that is itself outside of the appropriations process – a double insulation of the cords of the Congressional scholarship that is “unprecedented” across government.”

The CFPB has not yet indicated whether it will appeal the decision. An agency spokesperson said in a statement that there was “nothing new or unusual in Congress’s decision to fund the CFPB outside of annual expense bills.”

“Other federal financial regulators and the entire Federal Reserve System are funded this way, and programs such as Medicare and Social Security are funded outside of the annual appropriations process,” the spokesperson said. .

Over the past decade, the CFPB has helped oversee major banks, and in particular the student loan industry. At the end of September, for example, the agency released a report with numerous findings on potentially illegal actions by student loan companies, including obstructing borrowers’ access to targeted loan cancellation programs and plans. income-based reimbursement. And in March, the agency fined a student loan company $1 million for “making misleading representations” to borrowers with private student loans about their repayment options.

Mike Pierce, executive director of advocacy group Student Borrower Protection Center and former CFPB regulator, said in a statement that for more than a decade, “CFPB has fought big fights with powerful financial corporations and stood up for workers. “.

“Because the Bureau has been so efficient, it has become the favorite punching bag of Wall Street and its army of bought-and-paid lawyers and judges,” he said. “Today’s ruling has nothing to do with fairness or justice – it’s a crude game of reactionary politics played by people who want to keep families stuck in debt.”

About Judith J. George

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