Consumer Financial Protection Bureau v. Community Financial Services, argued Tuesday before the Supreme Court, is nominally an industry challenge to the bureau’s payday-lending rule. 

But the challengers’ effort to invalidate that rule has called into doubt the constitutionality of the bureau’s independent funding scheme.

Thus, the issues the court must decide are: (1) whether the Constitution imposes any meaningful restriction on the ways Congress can fund the executive branch and (2) whether the court has any ability to enforce such limits.

After an hour-and-a-half of spirited argument, the answers remain in doubt.

In 2010, Congress responded to the 2008 financial crisis by enacting the Dodd-Frank Wall Street Reform and Consumer Protection Act, so named after its sponsors, then-Sen. Chris Dodd, D-Conn., and then-Rep. Barney Frank, D-Mass.

That law created the Consumer Financial Protection Bureau (CFPB), an agency without analogue, vested with a broad portfolio of legislative and executive enforcement power, headed by a single director, and enjoying the power to determine and draw its own annual “non-appropriated” funding directly from the Federal Reserve, up to 12% of the latter’s annual operating expenses. 

That contrasts with the host of other federal agencies that are obliged to request their annual funding through Congress’ appropriations process. That process is grounded in the Constitution’s Appropriations Clause, which states that “no money shall be drawn from the Treasury, but in consequence of appropriations made by law.”

In 2022, the 5th Circuit Court of Appeals held that Congress’ decision to make the bureau’s funding indefinite and “non-appropriated” under Dodd-Frank violated the Appropriations Clause. That set the stage for a drama that pits traditional constitutional restraint against the implacable urge to devise new, more expedient government solutions to society’s intractable problems.

Solicitor General Elizabeth Prelogar, arguing for the government, maintained that despite designating the CFPB’s funds as “non-appropriated,” Congress had, in fact, validly appropriated those funds in the constitutional sense. By designating the bureau’s indefinite funding “non-appropriated,” Congress had merely exempted the CFPB from the annual appropriations process, which, in her view, is not mandated by either the Appropriations Clause’s text or history.

Former Solicitor General Noel Francisco, arguing on behalf of the challengers, maintained that Dodd-Frank had impermissibly delegated Congress’ appropriations power to the executive branch.

He stressed the Framers’ concerns with keeping Congress’ exclusive power of the purse separate from the executive branch, whereas Dodd-Frank had the exact opposite effect. Although Congress had set an ostensible limit on the bureau’s power to requisition funds, Congress set that sum so high that it ensured the CFPB would never need to hit it.

In reality, Congress refused to decide the bureau’s actual funding needs and enabled the bureau’s director to choose any number between $0 and roughly $750 million annually. 

The court’s originalist tendency to use text and history as primary interpretive tools influenced oral arguments.

Both advocates drew support from the historical record of congressional appropriations, albeit from different aspects.

Prelogar emphasized the diversity of funding practices Congress has employed from the Constitution’s ratification onward, including lump-sum appropriations and perpetual funding of certain entities through fee collection.

Francisco emphasized the absence of a truly comparable funding scheme in the historical record.  He also distinguished fee funding as inherently limited by market forces and traditionally restricted to entities that are service providers, such as the Postal Service.

Yet, it’s unclear whether originalism will influence the ultimate decision in this case. As Chief Justice John Roberts once wrote, “The Framers could hardly have envisioned today’s vast and varied federal bureaucracy and the authority administrative agencies now hold over our economic, social, and political activities.”

But the difficulty of distilling the case’s separation-of-powers concerns into a clean, readily applicable rule could dissuade a majority of the justices from declaring the bureau’s funding unconstitutional. 

In sheer volume and stridency of questioning, the court’s three Democrat-appointed justices far outdid their colleagues.  Questions from Justice Ketanji Brown Jackson, the most animated during the proceedings, sounded alternately incredulous at, and exasperated by, Francisco’s argument that the bureau’s indefinite, independent funding raised separation-of-powers concerns. 

Jackson questioned whether the historical record was even relevant to the constitutionality of the bureau’s funding.  She insisted that giving an executive agency the power to draw its own funding was, somehow, not a transfer of Congress’ appropriations power. She even implied that the court itself would create a separation-of-powers problem if it dared to interpret the scope of Congress’ appropriations power.    

If her questions reflect her views, Jackson would end the interpretive inquiry with the text of the Appropriations Clause. Because those 16 words do not explicitly forbid what Congress did in Dodd-Frank, in her estimation, no constitutional line has been crossed. 

That view, though appealing in its simplicity, is profoundly mistaken. It ignores the fact that the clause’s text is not self-explanatory. It does not define what an appropriation is, and its demand for an “appropriations made by law” implies that not all laws are appropriations, even if they contemplate the need to spend money.

There is agreement on these points across the scholarly literature. So, sticking with text alone is not a real option. 

Jackson also ignores the clause’s context. It appears not in the section of Article I that gives Congress powers, but in the section that restricts Congress’ exercise of those powers. The Appropriations Clause, however, would neither restrict Congress’ spending power, nor keep it exclusively congressional if the clause is interpreted as broadly as Jackson suggests.

The CFPB’s de facto spending power under Dodd-Frank illustrates that fact.

And Jackson’s approach is blithely indifferent toward the tension created by an unrestrained reading of Congress’ appropriations power and the Framers’ fear of the executive branch wielding the spending power.

When Francisco explained that Jackson’s approach would deprive the Appropriations Clause of all limitations, Jackson replied: “Why is that a problem?”

Jackson’s approach is a parody of judicial restraint veering toward judicial quietism—that is, extreme passivity when confronted with the nation’s challenges.

There are certain political disputes that courts should not resolve for reasons of prudence or limited judicial competence.  But this case goes to the heart of the judicial role; namely, interpreting difficult constitutional clauses.

Yet, Jackson would have the courts ignore their duty and overlook the blatant attempt of one Congress to circumvent the Constitution based on the dubious assertion that Congress alone can interpret a provision meant to limit its power. 

Unfortunately, Jackson was not alone in her views, merely the most voluble. Justices Elena Kagan and Sonia Sotomayor both indicated that the historical record provided little evidence constraining Congress from funding the executive branch however it wished.   Kagan, untroubled by the lack of truly analogous entities, insisted that the CFPB “is not novel” and that by granting the CFPB indefinite funding, Dodd-Frank only “subtract[s] out Congress a little bit.”

Justice Amy Coney Barrett expressed doubts that Francisco had offered the court a usable threshold or test for assessing the constitutionality of appropriations.  In the same vein, even Justice Clarence Thomas told Francisco: “We need a finer point.”

When possible, courts should state their holdings in clear, rule-like language the better to guide other courts in future cases. But courts often resolve the case before them without indicating how they would resolve a future case with different facts.

And while the difficulties anticipated in hypothetical future cases—say a constitutional challenge to the Federal Reserve—weigh on the justices, it is neither necessary, nor even appropriate, for the court to settle those distinct questions now, rather than addressing the unique constitutional concerns raised by the CFPB.

Forecasting a result from oral arguments is always a mug’s game. But if a majority of the court upholds the bureau’s funding because it cannot discern a rule that would be applicable to all future appropriations cases, it would not be surprising, merely disappointing. 

It should not be forgotten that the CFPB was created when a single party held the presidency and massive majorities in both houses of Congress. To be sure, the overwhelming support of voters does anything but undermine the validity of proper legislative acts. But even when one party is at the height of its power, the Constitution prevents the political branches from reshaping the fundamental distribution of powers. 

With the bureau as blueprint, there is no principled limit to the issues and areas that future Congresses can spin off beyond the reach of effective democratic control. 

Each of the CFPB’s anomalous fiscal features—indefinite self-funding, discretion to choose any funding level between $0 and $750 million, ability to draw that funding from another insulated source—might be constitutionally tolerable on their own. But the individual ingredients of a fertilizer bomb are legal, too. It is only when they are combined that the destructive potential is realized.

Perhaps more dangerous still is that the destructive potential of the CFPB’s funding will become evident only over the long term. As Francisco warned the court: “Structures don’t crumble in a day; they crumble over time.”

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