President Reagan once said, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”
The death of any government bureau is notable because the occurrence is so rare. Last month, the Court of Appeals for the 5th Circuit, in effect, drew up a death warrant for the Consumer Financial Protection Bureau. More precisely, the court ruled that all of the operations of the CFPB have been unconstitutional.
The CFPB is one among many federal and state agencies that regulate banks and payday, mortgage, student and auto loans, created by the 2010 Dodd-Frank Act when Democrats controlled Congress and the presidency. The CFPB can reasonably be understood as an attempt to entrench partisan power: the bureau is particularly immune from influence by future Congresses or presidents.
The big problem is that the Dodd-Frank Act blocked the president from being able to fire the head of the CFPB and funded the agency outside of the Constitution’s normal congressional appropriation process.
The Constitution puts Congress in charge of appropriating money yearly to run government entities like regulatory agencies. Congress regularly uses this power to prevent agencies from using money to accomplish things Congress doesn’t like. Dodd-Frank attempted to circumvent that requirement, allowing the CFPB to get the money for its operations directly from the Federal Reserve, which can print as much as it wants.
This highly unusual funding mechanism cuts all the strings of democratic accountability. If the president and Congress can’t control an agency, it is unaccountable to the people. The Constitution was designed to prevent precisely this kind of immunity from accountability.
In 2020, the Supreme Court already invalidated Dodd-Frank’s prohibition on presidential removal — firing the head of the CFPB — in a case called Seila Law v. CFPB. While that restored the CFPB to presidential control, it did nothing to allow congressional decisions to oversee and influence the CFPB.
That’s why the 5th Circuit, in Consumer Financial Services Association v. CFPB, has ruled that the Dodd-Frank Act also violated the constitutional requirement that “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”
America’s founders understood that any executive would prefer unilateral control of the public finances instead of persuading Congress to go along with funding decisions. The founders had seen the consequences of unchecked political authority. The king in England tried to bypass the legislature to provide funds for the government. That led to King Charles I being beheaded and King James VII and II being deposed; ultimately, it forced a reckoning, the Glorious Revolution, that gave Parliament greater power over the public purse. The founders wanted to prevent the political chaos that England had faced from occurring here.
The 5th Circuit’s decision means the people’s representatives in Congress once again have control over the purse strings. Congress controls the agency’s use of money and the people control Congress. The Constitution provides for public accountability; the founders would have been horrified at the notion of an unaccountable government bureau. It’s a decision that could even be applied to other oddly-funded agencies, as the courts will likely be asked to re-examine them — unless Congress gets to them first by insisting on a funding mechanism that comports with the Constitution.
What’s next for the CFPB? Maybe the case will be appealed to the Supreme Court. If the Supreme Court doesn’t overturn the 5th Circuit, the Consumer Financial Services Association v. CFPB decision amounts to a death rattle because other attorneys are bringing cases that argue that more and more functions of the CFPB are impermissible.
Nonetheless, there is a good possibility it will rise again, like a ghoul that can’t be killed. Congress needs to fund the CFPB in the usual way, through the appropriations process.
Either way, these matters must be resolved soon, whether by the courts or by Congress because the CFPB is not backing down. Most recently, the Biden administration has been using the bureau to prohibit what it calls “junk fees” — fees for a bunch of unrelated consumer transactions that the CFPB doesn’t like. That’s a terrible policy that will lead to higher prices and fewer choices for consumers regarding banking products, a la carte auto purchases, and other optional services.
At least if Congress funds the CFPB to comply with the strictures of the Constitution, people and businesses have somewhere to take their grievances — to elected officials who have some incentive to care.