The Supreme Court on Tuesday will hear oral arguments in a case that concerns the Constitution’s separation of powers, and according to former Assistant Attorney General Thomas M. Boyd, it “might invalidate the most powerful federal administrative agency ever created.”
In an opinion piece for the New York Post, Boyd, who was appointed by former President Ronald Reagan, discusses Consumer Financial Protection Bureau v. Community Financial Services Association of America, an “appeal of the Fifth Circuit’s unanimous holding that the CFPB’s use of the Federal Reserve System to fund its operations violates the Constitution’s separation of powers.”
According to its website, the Consumer Financial Protection Bureau (CFPB) is “a U.S. government agency dedicated to making sure you are treated fairly by banks, lenders and other financial institutions.”
In February, the White House highlighted the CFPB’s role in President Biden’s “agenda of promoting competition in the American economy.”
The CFPB “is proposing a rule that would slash excessive credit card late fees, pursuant to its authority under the bipartisan Credit CARD Act of 2009,” the White House announced. “The rule is projected to reduce typical late fees from roughly $30 to $8, saving consumers as much as $9 billion a year in late fees.”
“The CFPB targeted overdraft and bounced check fees, releasing two reports in 2021 and ramping up its oversight, driving 15 of the 20 largest banks to agree to put an end to bounced check fees. The CFPB followed up by releasing guidance banning surprise overdraft fees – fees charged for overdrawing a checking account even though at the time of purchase there appeared to be sufficient funds – and surprise depositor fees charged when you deposit someone else’s bounced check,” according to the release. “These changes will reduce fees by more than $1 billion annually.”
According to Boyd, the Fifth Circuit’s opinion “declared that the agency’s ‘perpetual insulation from Congress’ appropriation power, including the express exemption from congressional review of its funding, renders’ it unaccountable ‘to Congress and, ultimately, to the people.'”
Boyd explains:
When it was enacted as part of the 2010 Dodd-Frank Act, the bureau assumed the administration of 18 existing federal statutes.
It was given unprecedented regulatory enforcement powers, including the authority to conduct investigations, initiate administrative proceedings, and litigate civil actions in its own name, potentially resulting in civil penalties as high as $1 million for each day a violation occurs.
Its director, appointed by the president, can only be removed for cause, and the Federal Reserve must provide funding that the director deems “reasonably necessary to carry out” the bureau’s responsibilities — up to 12% of the Fed’s operating expenses.
“The unprecedented breadth of the CFPB’s powers has surrounded the agency with controversy ever since,” he writes.
Many of the bureau’s 300 actions against American companies “have harmed American consumers,” Boyd states, adding that it has “made small short-term loans extremely difficult to get.”
“It’s trying to ban arbitration agreements, even though the Treasury Department found a previous, more limited CFPB attempt to do so would ‘impose extraordinary costs — generating and transferring $330 million to plaintiffs’ lawyers,'” Boyd writes. “And it has unilaterally decided to extend the Equal Credit Opportunity Act’s anti-discrimination provisions to companies that don’t even extend credit.”
In 2020, in Seila Law v CFPB, Chief Justice John Roberts severed the issue of the director’s tenure with the bureau’s funding mechanism and, writing for a 5-4 majority, ruled the tenure unconstitutional.
Instead, Roberts imposed “an ‘at will’ standard,” according to Boyd, “meaning a president can fire the agency’s chief.”
However, Justices Clarence Thomas and Neil Gorsuch “opposed the court’s severability decision, writing that ‘independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances,'” Boyd writes.
Following that decision, Amy Coney Barret joined the court.
“So the Supremes may well hand down an even tougher opinion in next week’s case,” Boyd predicts.
“The court agreed to hear the CFPB’s appeal in February, but in March, the Second Circuit issued a unanimous three-judge opinion of its own, upholding the bureau’s funding mechanism,” he writes. “The panel felt the Constitution’s requirement that ‘No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law’ had been satisfied simply by Congress’ decision to enact the CFPB’s funding mechanism as part of Dodd-Frank.”
According to Boyd, “Notwithstanding that opinion, the precedent set by bestowing such enormous enforcement authority on an independent agency funded outside the appropriations process deserves reversal.”
He notes the timing of the oral arguments.
“The court customarily takes its vote on the Wednesday or Friday following oral argument, Oct. 4 or 6 in this instance,” Boyd writes. “If that happens, a final opinion could be issued before the end of the calendar year, and if the court throws out the funding mechanism as unconstitutional, it could also choose to delay the imposition of its ruling and give Congress the whole of 2024 to craft an alternative.”
“Something must be done,” the former attorney general states. “The CFPB has more power than any agency in US history, and its potential to abuse this authority is enormous.”
Writers and editors can be contacted at [email protected] with feedback, tips, or corrections.
Melissa Fine is the former executive editor of Casino Player, Strictly Slots, and Poker
Digest magazines. She is a UCLA graduate, news junkie, and dedicated Stargate SG-
1 fan. Melissa currently lives with her dog and two cats in a tiny town in the Sierra
Nevada foothills.
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