A ruling against the CFPB could have significant implications and potentially undo a decade’s worth of agency decisions. Legal analysts suggest that it could also threaten the foundation of other major agencies, such as the Federal Reserve.
Many of the justices appeared hesitant to take that path, with some Republican appointees aligning with the three Democratic appointees in suggesting that the CFPB falls within the historical practices of Congress. Justice Elena Kagan, an Obama appointee, remarked, “You’re just flying in the face of 250 years of history” when addressing the challengers of the CFPB’s budgetary independence.
The CFPB was established after the 2008 financial crisis as a consumer-focused regulator for banks and financial institutions. Senator Warren, at the time a Harvard University law professor, envisioned an agency independent of political pressures.
A Democrat-controlled Congress and President crafted the CFPB to have a single director who cannot be easily fired and who can set the agency’s budget by taking money from the Federal Reserve, as long as it does not exceed $600 million.
While the Supreme Court has already overturned the CFPB’s firing limits, opponents argue that the power to set its own budget infringes on the Constitution.
Attorney Noel Francisco, representing the Community Financial Services Association of America, argued that this case is about checks and balances. He challenged a 2017 decision made by the CFPB, which imposed new limits on payday lenders.
Solicitor General Elizabeth Prelogar, defending the CFPB, contended that the agency’s budgetary independence is within the historical norm of how Congress has used its spending power. She cited other agencies, such as the Federal Reserve and the Federal Deposit Insurance Corp., that also enjoy budget independence.
Justice Ketanji Brown Jackson presented two competing interpretations of Congress’ power of the purse. One viewpoint suggests that Congress should provide specific directions for program funding, while the other argues that Congress has broad power to decide how a program is funded.
Mr. Francisco argued that perpetual independent budget authority, not linked to the agency’s regulatory activities, is not what the founders intended. He stated, “Congress can’t simply say to the executive, you pick the amount. Which is why I think when you look at this language, at a minimum Congress has to pick the amount.”
Justice Brett M. Kavanaugh pointed out that Congress always has the power to change the agency’s funding structure if desired.
Overall, the case revolves around the interpretation of the power of the purse as outlined in the Constitution. The Supreme Court’s ruling could have far-reaching consequences and potentially reshape the balance of power between Congress and the president.
