Next week, the Supreme Court will start to hear oral arguments about a massive government agency (an idea originally proposed by Elizabeth Warren that now has roughly 1,500 employees) which can affect thousands of businesses across the country without being accountable to anyone but itself.
The Consumer Financial Protection Bureau (CFPB) in its present form escapes the separation of powers enumerated in the Constitution and holds power to destroy businesses at will. As Oliver Dunford of the Pacific Legal Foundation wrote last October in The Hill:
The CFPB may prescribe rules and regulations under various consumer-protection laws; enforce conduct that it may define as ‘unfair, deceptive or abusive’; and adjudicate its own enforcement actions and impose legal and equitable remedies. Right away, you’ll notice by that brief description that the CFPB captures the roles and responsibilities of all three branches of government under one roof. So much for separation of powers.
So let’s say your company is accused of violating a CFPB rule. The CFPB can sue you in court or — at its sole discretion — subject you to an administrative-enforcement hearing, administered by the CFPB. If you don’t like the CFPB’s in-house decision, you can appeal — to the CFPB’s director. And only after the director’s decision could you seek review in a court of law.
But the deck is stacked even then, because courts are required to defer to the CFPB’s factual findings and legal conclusions. The ultimate outcome of this concentration of discretionary power, together with its significant independence of the three traditional branches of government, is arbitrary and abusive government.
The Pacific Legal Foundation asked in a friend-of-the-court brief in the case of Seila Law v. CFPB, “Whether the vesting of legislative, executive, and judicial powers in the Consumer Financial Protection Bureau, an independent agency led by a single director who cannot be removed except for cause, violates the separation of powers.”
The brief continued, “This case presents the Court with a unique and dangerous concentration of the federal government’s legislative, executive, and judicial powers in a single, ‘independent’ agency; an agency headed by a lone ‘Director’ empowered with vast executive discretion but protected from removal except for cause; an agency whose actions enjoy an unprecedented freedom from oversight by the government’s constitutionally vested powers. The combination of authority, discretion, and impunity in this independent power all but guarantees arbitrary governance. This is, therefore, ‘a case about executive power and individual liberty.’”
The brief added, “Created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB or Bureau) and its lone Director were given vast powers—legislative, executive, and judicial—along with substantial protections against interference by the three constitutional powers of government. As then-Judge Kavanaugh noted, with the exception of the President, the CFPB Director ‘enjoys more unilateral authority than any other official in any of the three branches of the U.S. Government.’”
More:
The Bureau was given vast discretion to determine how it may enact these generally applicable rules, and it is not limited to the formal rulemaking process. The CFPB is authorized to “establish the general policies of the [CFPB] with respect to all executive and administrative functions,” including “implementing the Federal consumer financial laws through rules, orders, guidance, interpretations, statements of policy, examinations, and enforcement actions.” Perhaps most troubling, this power allows the CFPB to use administrative-enforcement actions (which, as noted below, are subject to deferential judicial review), not only to enforce existing rules, but also to establish new policies—that is, to punish conduct that was, before an enforcement action, perfectly legal.
The CFPB is also largely free of congressional oversight. Most significantly, the CFPB’s budget does not go through Office of Management and Budget review, and it is not submitted to Congress for annual appropriations subject to the relative priorities of the President and Congress. Instead, the CFPB Director—alone— sets the agency’s budget; and its funds come not from Congress (pursuant to an appropriations bill signed into law by the President), but from the Federal Reserve, which “shall transfer” to the CFPB funds in “the amount [up to 12 percent of the Federal Reserve’s operating budget] determined by the [CFPB] Director to be reasonably necessary” to administer the consumer-protection laws. These funding decisions are effectively unreviewable.