“The purse and the sword ought never to get into the same hands.” That was Founding Father George Mason’s admonition in 1787. The Supreme Court heard its first politically charged case of the term on Oct. 3. Its decision will answer the question: Is the Consumer Financial Protection Board (CFPB) an unconstitutional Democrat Party workaround for the Appropriations Clause? Conservatives hope a majority of justices sweep the CFPB into the ashbin of history with future attempts to fund agencies outside of traditional appropriations bills.
This case was born when an industry group of payday lenders challenged a regulation issued by the CFPB. They are fighting rules issued by the federal agency preventing certain automatic withdrawals of payments and preventing lending without investigating a borrower’s ability to repay. They sued, arguing, among other challenges, that the CFPB was not constitutional because of how it is funded. When Congress set up the agency, it provided a funding range and let the director determine the specific budget. The lower court agreed, and the Supreme Court will decide its fate this term.
The appellate court (5th Circuit) ruled last year that the bureau’s funding mechanism ran afoul of the Appropriations Clause:
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
Near the end of the argument session from a relatively hot bench, Justice Clarence Thomas said to the lenders’ attorney, Noel Francisco: “I’d like you to complete this sentence: Funding of the CFPB is — violates the Appropriations Clause because?” Francisco replied, “Because Congress has not determined the amount that this agency should be spending. Instead, it has delegated to the director the authority to pick his own appropriation, subject only to an upper limit that’s so — so high it’s rarely meaningful.”
According to Solicitor General Elizabeth Prelogar, Congress has funded other agencies in the past by similar means, including the Customs and Border Patrol. Francisco countered that agency collections practically limited those funding mechanisms, while CFPB’s were not.
Supreme Court Examines Funding Mechanism
Elizabeth Warren (Photo by Chip Somodevilla/Getty Images)
Like J. Edgar Hoover and the FBI, Sen. Elizabeth Warren (D-MA) and the CFPB are so mated. While teaching at Harvard Law before entering electoral politics, she wrote about what such an agency could and should do. It was ushered into law as part of the Dodd-Frank bill and sold as a consumer protection vehicle along party lines, with only a few Republicans voting yes. When President Barack Obama appointed Warren assistant to the president and special adviser to the secretary of the Treasury on the Consumer Financial Protection Bureau in 2010, he said, “I am very grateful that Elizabeth has agreed to serve in this important role of getting the Consumer Financial Bureau up and running and making it as effective as possible.”
Warren would have been appointed the head of the agency, but Obama didn’t think she could get through Senate confirmation. He and top Democrats engineered a funding mechanism different from regular appropriations – instead from fees collected by the Federal Reserve. It was a workaround that has prevented the agency from extinction until now. Chief Justice John Roberts called the Biden administration’s theory of congressional funding theory “aggressive,” while Justices Sonia Sotomayor and Ketanji Brown Jackson challenged the notion that the funding mechanism was ahistorical.