How the Supreme Court could move to rein in the Consumer Financial Protection Bureau 

On Oct. 3, the Supreme Court is hearing oral arguments in a case challenging the constitutionality of the funding structure of the Consumer Financial Protection Bureau (CFPB). The court’s decision in CFPB v. CFSA will not only be a bellwether of constitutional norms — it may also enable true congressional oversight and reform of a regulatory agency long in need of it. 

The Framers designed the U.S. Constitution’s separation of powers and checks and balances to protect the rights of the people against tyranny imposed by an officeholder or a majority faction. But this structure impeded the type of sweeping societal transformation that progressives such as Woodrow Wilson and Frank Goodnow desired. To circumvent this obstacle to their ambitions, they advocated separation of “politics” (i.e., decision-making by elected representatives) from “administration” (i.e., decision-making by purported experts educated in the social sciences). 

As the argument went, if government administrators were insulated from political interference, they could be trusted to selflessly discern and implement the “general will” of the people without need for checks on their authority from duly elected representatives of the people. This anti-democratic approach to governance took root in the New Deal and spawned the expansion of the federal bureaucracy into the massive administrative state we know today. 

No federal agency better embodies the progressive vision of government-by-administrator than the CFPB.

The brainchild of then-professor Elizabeth Warren, the CFPB was created in 2010 by the Dodd-Frank Act, which granted the agency broad and commanding regulatory authority over financial markets. To exercise this authority, the CFPB’s sole director was given the combined powers of a legislature (writing regulations), an executive (enforcing laws), and the judiciary (adjudicating administrative proceedings). The CFPB was also designed to be permanently unaccountable to the elected branches. The president could not fire its director except under special conditions; the agency received guaranteed funding outside of the regular congressional appropriations process; and its budget could not be reviewed by Congress or approved by the White House Office of Management and Budget. 

Recently, this progressive vision has met with constitutional reality. In the 2020 Seila Law case, the Supreme Court invalidated the CFPB director’s statutory protection from presidential removal. And last year, the Fifth Circuit Court of Appeals found that the CFPB’s independent funding structure violated the Appropriations Clause of the Constitution. 

The CFPB’s response to these legal developments has been telling.  

On one hand, the current director has enthusiastically worked to advance White House political priorities, notably joining a presidential “junk fees” initiative to combat the effects of rampant inflation precipitated by federal stimulus spending. This is how it should be: subordinate officers and employees executing the president’s lawful orders.  

On the other hand, the bureau has fought to keep its funding and budget free from congressional accountability, evading a foundational constitutional check that serves to balance power between the legislative and executive branches. 

Herein lies the CFPB’s crisis of legitimacy. In acceding to the political will of one branch of government (pursuing the president’s political agenda) but resisting the other, the director is playing politics and has forfeited any principled claim to budget independence. By pursuing political ends with funds beyond political control, the CFPB governs without the consent of the sovereign people, which is the sole basis for legitimacy in our republic. 

When the Supreme Court hears the CFPB v. CFSA case, the key question is whether Congress must ensure that the people have a say in how the CFPB spends their money and thereby plays a meaningful role in ensuring the agency acts within legal bounds. 

Brian Johnson is the former deputy director of the CFPB and former Chief Financial Institutions Counsel for the U.S. House Committee on Financial Services. The views expressed here are not necessarily those of any organization.