Supreme Court conservatives voice doubts in CFPB proceedings

The United States Supreme Court is currently hearing a case that questions the constitutionality of the Consumer Financial Protection Bureau's (CFPB) funding structure. The case, which has been ongoing since the Trump administration filed the lawsuit, has garnered attention due to the potential implications it may have on the independence and operation of the federal agency.

Arguing on behalf of the Biden administration, Elizabeth Prelogar cited examples of similar funding structures applied to agencies past and present. She argued that the CFPB's funding mechanism, which allows the director to pick their own appropriation, subject to an inflation-adjusted cap that has never been reached, is not unprecedented.

On the other side, Noel Francisco, a lawyer arguing on behalf of the case's two payday-lending trade group plaintiffs, maintains that the CFPB's funding violates the appropriations clause of the Constitution. Francisco's argument is based on the premise that the CFPB receives funds from the Federal Reserve and not Congress, a departure from the traditional funding mechanisms of federal agencies.

The 5th U.S. Circuit Court of Appeals ruled last year that the CFPB's funding is unconstitutional, a decision that has been appealed to the Supreme Court. Justice Samuel Alito compared the hypothetical uncapped appropriation for the CFPB to the Federal Trade Commission's budget and asked if it would be consistent with the appropriations clause. In response, Francisco stated that it would effectively be a standing uncapped appropriation because the CFPB would never reach that amount.

Justice Neil Gorsuch asked a hypothetical question: "Could it be a trillion dollars?" regarding the potential uncapped appropriation for the CFPB. His question underscores the concern of the Supreme Court's conservative justices about the potential for unchecked spending under the CFPB's current funding structure.

Despite these concerns, Justice Clarence Thomas stated that the CFPB's funding structure is not a constitutional problem even if it's unique. Justice Elena Kagan, however, argued that on Francisco's view, the Federal Reserve would also be unconstitutional.

The CFPB received $641.5 million this year, according to Bloomberg. Ketanji Brown Jackson, another justice, asked Francisco where in the text of the appropriations clause it states the government had to fix the amount of funding.

Brett Kavanaugh, another Supreme Court justice, stated that the CFPB is no longer independent due to changes made in a previous case, but the funding structure cedes control to the executive branch. The 2nd U.S. Circuit Court of Appeals found the CFPB's funding structure constitutional in a March ruling, a decision that contrasts with the 5th Circuit's ruling.

A ruling in the CFPB case is expected before July. The outcome of this case could have significant implications for the CFPB and the future of independent federal agencies. John Roberts, the Chief Justice, called Prelogar's view of congressional appropriations power "aggressive," indicating that the conservative justices may lean towards finding the CFPB's funding structure unconstitutional.