Consumer Financial Protection Bureau v. Law Offices of Crystal Moroney, P.C.
CASE SUMMARY
The New Civil Liberties Alliance filed a lawsuit challenging, among other things, the Consumer Financial Protection Bureau’s (CFPB) leadership and funding structures. In Law Offices of Crystal Moroney v. Bureau of Consumer Financial Protection, NCLA asserted that CFPB’s leadership structure violated the Take Care and Appointments Clauses of Article II of the United States Constitution. Since CFPB’s single-Director was only removeable for cause, the President was unconstitutionally prohibited from exercising control or oversight of an executive agency’s enforcement activities and resource allocation. The U.S. Supreme Court agreed with NCLA’s argument, finding the for-cause removal provision unconstitutional in Seila Law v. CFPB (NCLA filed as amicus curiae in the case).
CFPB tried to compel production of documents and information related to the Crystal Moroney’s law firm’s debt collection practices over several years. It also unlawfully sought confidential and privileged attorney-client material generated in the course of Ms. Moroney’s practice of law. Moreover, the agency pursued its enforcement action in the wake of Seila Law with an invalid attempt to ratify the prior unconstitutional issuance of the CID and related administrative proceedings.
The Supreme Court has not yet addressed NCLA’s argument that Congress unlawfully divested its legislative appropriations power when it gave CFPB the ability to draw funding directly from the Federal Reserve, without Congressional appropriations committee oversight or annual appropriations. Congress has surrendered the power of the purse to the President and an executive branch agency, violating Article I of the Constitution. In June 2023, NCLA filed a petition for a writ of certiorari with the Supreme Court, asking the justices to resolve this issue.
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CASE STATUS:
On Appeal
CASE START DATE:
December 19, 2019
DECIDING COURT:
U.S. Court of Appeals for the Second Circuit
ORIGINAL COURT:
U.S. District Court for the Southern District of New York
CASE DOCUMENTS
July 24, 2023 | Memorandum for Respondent
June 21, 2023 | Petition for a Writ of Certiorari
May 8, 2023 | Appellee Consumer Financial Protection Bureau's Response in Opposition to Motion to Stay the Mandate
April 28, 2023 | Motion to Stay the Mandate Pending the Filing of a Petition for a Writ of Certiorari
March 23, 2023 | Decision of the U.S. Court of Appeals for the Second Circuit
October 19, 2021 | Petition to Set Aside or, in the Alternative, to Modify the Fourth Civil Investigative Demand
October 19, 2021 | Petition to Set Aside or, in the Alternative, to Modify the Fourth Civil Investigative Demand
September 29, 2021 | Civil Investigative Demand served on the Law Offices of Crystal Moroney, P.C. on September 29, 2021
August 26, 2021 | Civil Investigative Demand served on the Law Offices of Crystal Moroney, P.C. on August 26, 2021
July 2, 2021 | Appellant’s Reply Brief
June 4, 2021 | Brief of Appellee Consumer Financial Protection Bureau
March 5, 2021 | Brief and Joint Appendix of Appellant Law Offices of Crystal Moroney, P.C.
January 29, 2021 | Appellant’s Reply to Appellee’s Opposition to Motion to Stay Pending Appeal
January 15, 2021 | Appellee’s Opposition to Motion for Stay Pending Appeal
January 11, 2021 | Emergency Motion to Stay Enforcement of Civil Investigative Demand Pending Resolution of Appeal
December 8, 2020 | Response to CFPB’s Supplemental Letter to Its Opposition to Motion to Stay Pending Appeal in the U.S. District Court for the Southern District of New York
December 3, 2020 | Notice of Recent Authority in the U.S. District Court for the Southern District of New York
November 12, 2020 | Scheduling Order in the United States Court of Appeals for the Second Circuit
October 21, 2020 | Civil Appeal Pre-Argument Statement
September 24, 2020 | Opposition to Respondent’s Motion to Stay Pending Appeal
September 19, 2020 | Motion to Stay Pending Appeal
August 19, 2020 | Order to Enforce the Civil Investigation Demand
August 18, 2020 | Petition to Enforce Hearing Transcript
July 29, 2020 | Petitioner’s Reply to Respondent’s Response to Order to Show Cause
July 15, 2020 | Response to Order to Show Cause
June 9, 2020 | Letter-Motion to Consolidate and Stay
April 30, 2020 | Amended Verified Complaint for Permanent Injunctive and Declaratory Relief
April 27, 2020 | Amended Petition to Enforce Civil Investigative Demand
February 27, 2020 | Plaintiff's Reply in Support of Motion for Preliminary Injunction
Plaintiff Law Offices of Crystal Moroney, P.C., comes before the Court to challenge a civil investigative demand (CID) that itself imposes no binding obligations on Plaintiff. And the CID will not impose any such obligations unless and until Defendant Consumer Financial Protection Bureau files a petition to enforce it in district court. When and if that happens, Plaintiff will have a chance to raise any legal objections it may have to the CID. Until then, Plaintiff faces no risk of fine or penalty if it simply does nothing.
Nonetheless, Plaintiff claims that the Court must immediately resolve its various constitutional objections to the CID. At the same time, it claims that the Court must enjoin the Bureau from filing the sort of CID-enforcement proceeding that could resolve Plaintiff’s objections in the context of an actual case or controversy between the parties. And Plaintiff makes these requests after having previously asked another judge of this Court to delay resolving its constitutional claims and then, after Plaintiff effectively prevailed in that action on other grounds, asking the court to re-open the case.
The law that established the Bureau and authorizes it to issue CIDs also put in place a comprehensive scheme of administrative and judicial review meant to avoid this sort of maneuvering by serving as the exclusive means to resolve disputes over CIDs. Plaintiff seeks to circumvent that scheme by pursuing this unripe collateral attack on the CID. The Court thus lacks jurisdiction over Plaintiff’s claims. For this reason, among others set out in this brief, Plaintiff cannot show the likelihood of success on the merits that it needs to justify a preliminary injunction. Plaintiff also cannot show that it will suffer irreparable injury if the Bureau seeks to enforce the CID in court or issues any additional non-self-enforcing CIDs.
The Court should deny Plaintiff’s motion for extraordinary emergency relief.
February 03, 2020 | Defendants’ Opposition to Motion for Preliminary Injunction
Plaintiff Law Offices of Crystal Moroney, P.C. (“Ms. Moroney’s Law Firm”) submits this Complaint for Permanent Injunctive and Declaratory Relief to prohibit Defendant Bureau of Consumer Financial Protection, also known as the Consumer Financial Protection Bureau (“the Bureau” or “CFPB”), and Defendant Director Kathy Kraninger, from perpetuating a lawless and retaliatory Civil Investigative Demand against Ms. Moroney’s Law Firm, and alleges as follows:
January 22, 2020 | Order to Show Cause
January 21, 2020 | Memorandum of Law in Support of Plaintiff’s Motion for Preliminary Injunction
The Law Offices of Crystal Moroney, P.C. (“Ms. Moroney’s Law Firm” or “she” or “her”) urgently needs judicial intervention to preserve the status quo and forestall the irreparable harm being caused by the Bureau of Consumer Financial Protection’s (the “Bureau” or “CFPB”) and CFPB Director Kathy Kraninger’s continuing and systematic violation of the Plaintiff’s fundamental right to due process. If the Defendants’ unconstitutional abuses of process persist unabated, Ms. Moroney’s Law Firm is likely to become insolvent, and she will not be able to seek redress of her grievances in the future, exacerbating the irreparable constitutional harms she continues to suffer. Thus, the Plaintiff respectfully requests that this Court temporarily enjoin the Defendants from conducting investigations into Ms. Moroney’s Law Firm—including issuing Civil Investigative Demands (CIDs) to third parties—and to prohibit issuance of future CIDs that target the Plaintiff, while this case is pending.
December 18, 2019 | Verified Complaint for Permanent Injunctive and Declaratory Relief
Plaintiff Law Offices of Crystal Moroney, P.C. (“Ms. Moroney’s Law Firm”) submits this Complaint for Permanent Injunctive and Declaratory Relief to prohibit Defendant Bureau of Consumer Financial Protection, also known as the Consumer Financial Protection Bureau (“the Bureau” or “CFPB”), and Defendant Director Kathy Kraninger, from perpetuating a lawless and retaliatory Civil Investigative Demand against Ms. Moroney’s Law Firm, and alleges as follows:
PRESS RELEASE
June 22, 2023 | NCLA Asks Supreme Court to Reverse Second Circuit, Hold CFPB’s Funding Method Unconstitutional
Washington, DC (June 22, 2023) – The Consumer Financial Protection Bureau (CFPB) is an outlier agency, and the U.S. Supreme Court should overturn its illegitimate funding method, the New Civil Liberties Alliance argues in a petition for a writ of certiorari filed in the case of Law Offices of Crystal Moroney v. CFPB. In October, the U.S. Court of Appeals for the Fifth Circuit decided in Community Financial Services Assoc. of America, Ltd. v. CFPB that the agency’s funding structure violates the Appropriations Clause of the U.S. Constitution. The Second Circuit panel in Moroney’s case explicitly disagreed with the Fifth Circuit, ruling in March that CFPB’s funding method was okay because it was “authorized by Congress and bound by specific statutory provisions.”
The Supreme Court already agreed to hear CFPB’s appeal of the CFSAA, Ltd. decision, so NCLA is asking the Court to hold Moroney’s cert petition until the justices decide that case. NCLA urges the Court to rule against CFPB, then grant Moroney’s petition and vacate the Second Circuit’s decision below. Meanwhile, NCLA will file an amicus brief in CFSAA, Ltd. v. CFPB, further detailing the agency’s unconstitutionality.
NCLA’s client, the Law Offices of Crystal Moroney, offered ways for debtors to resolve delinquent accounts by amicable agreement with debt collectors. CFPB issued multiple record demands to the law firm without once so much as alleging a violation of any federal debt collection laws. The agency unlawfully demanded that Moroney turn over massive amounts of documents—including attorney-client privileged material—and submit detailed written reports about her firm’s activities. Ms. Moroney’s law firm generated this material, to which CFPB was not entitled, over years of legal practice. Between June and October of 2017 alone, CFPB’s demands consumed 650 hours of Ms. Moroney’s time. Eventually, it became impossible for her to comply and keep her firm running.
Ms. Moroney’s ordeal is just one example of the unconscionable abuse CFPB inflicts on innocent Americans. The agency’s unique, self-funded structure makes it utterly unaccountable to Congress’ regular budgetary or oversight control. Congress created CFPB through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, investing it with daunting enforcement power to regulate consumer financial products and services. One court has called the Director of CFPB the second most powerful person in the federal government. Rather than rely on the annual appropriations process for funding, CFPB simply requisitions whatever Federal Reserve funds it unilaterally determines are necessary to carry out its functions (up to 12% of the Fed’s revenues). NCLA argues that the Constitution does not permit Congress to divest itself of power over CFPB’s annual budget.
NCLA released the following statements:
“The Framers adopted the Appropriations Clause to ensure that Congress maintains control over spending and thereby checks excessive Executive Branch power. The CFPB’s funding structure violates that principle by abandoning all meaningful constraints on the agency’s budget. CFPB’s abuse of Crystal Moroney and her law firm are all-too-predictable results of unconstrained executive power.”
— Richard Samp, Senior Litigation Counsel, NCLA
“Crystal Moroney’s law practice was destroyed by an agency that never articulated a charge, much less made a case against her. It is a devastating cautionary tale of what happens when Congress surrenders its Power of the Purse and unleashes bureaucrats unconstrained by law, due process, or budgetary discipline upon Americans who simply cannot defend themselves against administrative power unmoored from any constitutional tethers.”
— Peggy Little, Senior Litigation Counsel, NCLA
“Crystal Moroney prevailed against CFPB once—and she is poised to do so again. When Seila Law v. CFPB held that the Director of CFPB cannot enjoy protection against removal by the President, that ruling vindicated one of NCLA’s main constitutional arguments on Crystal’s behalf. But that Supreme Court ruling made CFPB’s funding structure even worse, because now all that Federal Reserve funding is directly controllable by the President. CFPB has jumped out of the unconstitutional frying pan directly into the fire. The Supreme Court needs to clarify once and for all that CFPB’s funding structure is unconstitutional.”
— Mark Chenoweth, President and General Counsel, NCLA
For more information visit the case page here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
March 8, 2021 | NCLA Challenges Constitutionality of CFPB’s Unique, Congress-Free Funding Structure
Washington, DC (March 8, 2021) — The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, has filed its opening brief in the U.S. Court of Appeals for the Second Circuit in the case of Bureau of Consumer Financial Protection v. Law Offices of Crystal Moroney, P.C. NCLA argues that the district court erred when it allowed CFPB to enforce a second Civil Investigative Demand (CID) against Ms. Moroney’s firm because the agency’s funding mechanism is unconstitutional. Given Congress’ unprecedented, broad delegation of appropriations authority to the President and CFPB, this case may ultimately provide the U.S. Supreme Court the opportunity to reinvigorate the Nondelegation Doctrine that five justices expressed interest in revisiting after the Court’s Gundy v. United States decision.
After being forced by CFPB’s outrageous demands to downsize more than two-thirds of its staff since the first CID was issued in 2017, Ms. Moroney’s law firm now faces another stream of demands generated by the second CID, which NCLA argues is illegitimate. The opening brief makes the point that Congress unlawfully divested its legislative appropriations power when it gave the President and CFPB the ability to draw funding directly from the Federal Reserve rather than be funded by appropriations via the bicameralism-and-presentment legislative process mandated by the Constitution.
Crystal Moroney already prevailed on her first structural constitutional claim against the agency when the U.S. Supreme Court held last June 30 in Seila Law v. CFPB that the CFPB Director’s protection from presidential removal violated the separation of powers because the agency head must be answerable to the President. That decision also affirmed that CFPB’s then-Director Kathy Kraninger was not lawfully empowered to act at the time the agency issued the second CID against Ms. Moroney’s law firm.
There are three remaining bases for Ms. Moroney’s appeal: 1) Title X of the Dodd-Frank Act violates Article I’s Appropriations and Vesting Clauses; 2) the Director’s attempt to blindly ratify the second CID was ineffectual because she intentionally caused the constitutional harm of which Ms. Moroney complains, along with several other defects in her attempted ratification; and 3) the second CID is unreasonable because it seeks information prohibited by Title X. NCLA is asking the court to reverse the district court’s erroneous judgment and dismiss the second unlawful CID.
A Second Circuit panel will hear oral argument on Ms. Moroney’s Motion to Stay Pending Appeal on Wednesday, March 10, 2021.
NCLA released the following statement:
“The CFPB has become the first federal agency in American history to be independent of Congress, but completely dependent upon the President. The Executive Branch cannot simultaneously set executive priorities and then take whatever funding it wants to achieve its goals, free of legislative approval or oversight. This dynamic is a direct affront to the Constitution, and it poses a serious threat to civil liberties, as Ms. Moroney knows all too well.”
— Michael P. DeGrandis, Senior Litigation Counsel, NCLA
For more information about this case visit here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
October 30, 2020 | WATCH: NCLA’s Case Video Shows the CFPB’s “Knee-Buckling” Power to Punish Private Citizens
Washington, DC (October 30, 2020) – During the last three years, Crystal Moroney has been fighting a multi-headed beast called the Consumer Financial Protection Bureau (CFPB). The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group today released its latest video production featuring the case, Bureau of Consumer Financial Protection v. Law Offices of Crystal Moroney, P.C.
The government agency targeted Ms. Moroney’s law firm with a Civil Investigative Demand (CID) in 2017. Since then, she has expended tens of thousands of dollars to comply with the CID and defend against its unlawful demands, and she has endured the punitive publicizing of CFPB’s baseless accusations to her clients. Now her business teeters on the brink of insolvency.
NCLA filed a lawsuit in the U.S. District Court for the Southern District of New York on Ms. Moroney’s behalf challenging the funding mechanism for the CFPB as unconstitutional. Specifically, NCLA alleges that Congress unlawfully divested its legislative appropriations power when it gave CFPB the ability to draw funding directly from the Federal Reserve without annual appropriations from Congress and without oversight from the appropriations committees of Congress. By handing over the power of the purse—a core legislative power—to an executive branch agency, Congress violated Article I of the Constitution, which vests ALL legislative power in Congress, including appropriations power.
On June 30, 2020, Crystal Moroney prevailed on her structural constitutional claim against the agency when the U.S. Supreme Court held in Seila Law v. CFPB, that the CFPB Director’s protection from presidential removal violated the separation of powers because the agency head must be answerable to the President.
Given Congress’s broad delegation of appropriations authority to CFPB, this case may ultimately provide the U.S. Supreme Court the opportunity to revive the Nondelegation Doctrine that five justices expressed interest in revisiting after the Court’s Gundy v. United States decision.
Excerpts from the video:
“I often describe it to family and friends as fighting a three-headed beast. As soon as you make some progress on one head, you’re fighting two more heads and the third grows back. It just feels somewhat hopeless, like there’s no rules that apply to this opponent.”
— Crystal Moroney, Defendant, Bureau of Consumer Financial Protection v. Law Offices of Crystal Moroney, P.C.
“Ultimately, this case is about a gross abuse of power. Crystal Moroney has a right to be free from the unlawful exercise of governmental authority, and that is exactly what the CFPB exercises.”
— Michael P. DeGrandis, Senior Litigation Counsel, NCLA
Read full case summary here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
August 18, 2020 | SDNY Judge Recognizes CFPB Acted Unconstitutionally, but Still Enforces CID Against NCLA Client
Washington, DC (August 18, 2020) – Oral argument was held telephonically today in Bureau of Consumer Financial Protection v. Law Offices of Crystal Moroney in the Southern District of New York. At the conclusion of argument, U.S. District Judge Kenneth M. Karas handed down a decision from the bench granting CFPB’s Petition to Enforce the Civil Investigative Demand (CID) it issued to the Law Offices of Crystal Moroney, P.C. The New Civil Liberties Alliance disagrees with the court’s ruling on numerous grounds but also recognizes that this case was always destined for higher court resolution given the current state of nondelegation precedent in lower courts.
The court ruled that while the Supreme Court’s Seila Law decision did not reach the Bureau’s unique funding structure, CFPB’s funding regime does not violate the Vesting or Appropriations Clauses of Article I. NCLA argued that CFPB’s funding structure violates the Appropriations Clause because the Bureau—not Congress—decides how much funding it receives each year and that Congress cannot divest its power of the purse or any other core legislative power. The court ruled CFPB had not done so here because it specified a formula in statute for the ceiling of how much the Bureau could obtain in annual funding.
The court also recognized that Seila Law’s holding applies to this case. Hence, as NCLA alleged, CFPB Director Kathy Kraninger was not lawfully empowered to act at the time the Bureau issued the CID because she was unconstitutionally insulated from removal by the President. However, the court ruled that she could nevertheless ratify her own prior invalid actions because the Bureau—not Kraninger herself—was the principal at the time of the unlawful act. NCLA disagrees with this ruling for several reasons, but one the court’s ruling failed to address stands out. Director Kraninger knew she was acting unconstitutionally at the time she acted in Nov. 2019—having admitted her unconstitutional status to Congress the previous September. This court today became the first ever to grant ratification where the ratifier knew what she was doing was unconstitutional in the first instance. NCLA will fully explore the possibility of appealing this and other aspects of the court’s decision.
It is unclear how this ruling impacts NCLA’s affirmative case against CFPB (filed in December 2019). While the court acknowledged that NCLA prevailed in its request for declaratory judgment that the Director was unconstitutionally insulated from removal by the President after Seila Law, the court did not comment on the other requests for relief presented in that case.
NCLA released the following statements:
“It took Ms. Moroney three years and $80,000—to say nothing of the stress and strain on her personal and professional life—to finally get her day in court to defend against the CFPB’s unconstitutional structure and abusive practices. While we are disappointed with the result, we are eager to advance our arguments on appeal, where we hope to vindicate Ms. Moroney’s civil liberties once and for all.”
— Michael P. DeGrandis, Senior Litigation Counsel
“The result in this case shows the enfeebled nature of the current Nondelegation Doctrine in the lower federal courts. Congress gave away its birthright by funding CFPB through the Federal Reserve rather than with direct appropriations. If Congress can divest the core legislative power of the purse, which Article I of the Constitution vests in it, then the current version of the doctrine has outlived its usefulness. Thankfully, a majority of the U.S. Supreme Court has already signaled its willingness to revisit this crucial constitutional issue.”
— Mark Chenoweth, Executive Director & General Counsel
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
July 16, 2020 | NCLA Disputes CFPB Enforcement Action on Ground that Agency Is Unconstitutional post-Seila Law
Washington, DC (July 16, 2020) – The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, filed a response last night to an order to show cause in Bureau of Consumer Financial Protection v. Law Offices of Crystal Moroney, P.C. in the U.S. District Court for the Southern District of New York. NCLA is challenging the Consumer Financial Protection Bureau’s (CFPB) unconstitutional manner of being funded and its Director’s doomed attempts to ratify her own prior actions, taken while her authority to act was unconstitutional.
Crystal Moroney and her law firm have been on the receiving end of the Bureau’s “knee-buckling” power to punish private citizens for more than three years. CFPB has not brought this lawsuit against Ms. Moroney on the basis of a consumer complaint, but rather on a pure fishing expedition into how her firm practices law. She has spent tens of thousands of dollars providing CFPB with thousands of pages of documents, generating dozens of reports, and answering more than 80 interrogatories. Despite her prodigious efforts to comply, CFPB is asking the court to force her to turn over attorney-client privileged documents—which she will not do. This is the second time the agency tries to interfere with Ms. Moroney’s attorney-client relationships.
CFPB’s unconstitutional design, which combines extraordinary power with unparalleled institutional independence, is at the root of its dysfunction and its scorn for civil liberties. From the outset, Congress unlawfully divested its power to make appropriations through law when it gave CFPB the ability to draw funding directly from the Federal Reserve on demand, without any oversight from Congress.
In a recent Supreme Court decision, Seila Law LLC v. CFPB, the Supreme Court declared the Director’s insulation from presidential control unconstitutional, but the Court did not address whether Congress may divest itself of its constitutional duty to fund government operations through appropriations. After Seila Law, the Director is answerable to the President. So, the President may now demand more than half a billion dollars per year in off-the-books funds, free from congressional oversight. He controls the enforcement agenda of a free-wheeling agency capable of financially ruining individuals and businesses caught in its crosshairs.
Seila Law has rendered CFPB’s decision-making process defective on multiple levels but has also brought new issues with the validity of the prior CID’s enforcement. Previous actions taken by an unconstitutionally structured agency must be nullified. The Bureau’s only lawfully acting principal prior to Seila Law was the President of the United States. Therefore, only the President could ratify the unconstitutionally insulated acts of pre-Seila Law Directors, but he has not. Thus, prior actions against the Law Offices of Crystal Moroney remain unenforceable.
NCLA urges the court to declare CFPB unconstitutional as funded and assert that the Bureau’s actions against Ms. Moroney’s law firm, while its Director was unconstitutionally insulated from removal, cannot be ratified by the agency director herself—the agent in the relationship—but only by the President.
NCLA released the following statement:
“CFPB is a rampaging Frankenstein’s monster. The Supreme Court cut out its Director’s unconstitutional for-cause removal provision in Seila Law, but the stitched-together abomination is still stumbling about wreaking havoc. The President now has absolute dominion over an agency that the Supreme Court described as having “knee-buckling” power to punish private citizens, with a direct pipeline to off-the-books funding without congressional appropriation. This unconstitutional monster must be stopped.”
— Michael P. DeGrandis, Senior Litigation Counsel, NCLA
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
June 29, 2019 | U.S. Supreme Court Agrees with NCLA that CFPB Director’s Protection from Removal Violates President’s Article II Duty
Washington, DC (June 29, 2020) – Today the U.S. Supreme Court agreed with the points argued by the New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group in its amicus brief filed in Seila Law LLC v. Consumer Financial Protection Bureau last December. Accordingly, the Court struck down the Consumer Financial Protection Bureau (CFPB) Director’s protection from Presidential removal as unconstitutional. NCLA supported petitioner Seila Law and argued that the President must have the power to remove any principal federal officer who exercises executive power. Article II of the U.S. Constitution requires the President to “take Care that the Laws be faithfully executed.”
In the majority ruling written by Chief Justice John Roberts, the Court explained that the “entire ‘executive Power’ belongs to the President alone” and the director of the agency therefore could be removed by the President of the United States “at will.” The 5-4 ruling on the constitutional question overturns a federal district court ruling and appellate court decision that had rejected the law firm’s arguments. The Court ruled 7-2 that severing the Director’s for-cause removal protection was a sufficient remedy to address this litigant’s objection to the agency.
“The CFPB’s single-Director structure … vest[s] significant governmental power in the hands of a single individual accountable to no one. The Director is neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is. The Director does not even depend on Congress for annual appropriations,” said Roberts. In other words, though the Director “wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U.S. economy [,]” the Director is not answerable to the President, so the President cannot direct CFPB policies or priorities.
In the wake of the 2008 financial crisis, Congress established the CFPB as “an independent regulatory agency tasked with ensuring that consumer debt products are safe and transparent.” But in organizing CFPB, Congress “deviated from the structure of nearly every other independent administrative agency in our history.” Instead of an independent agency with a multi-member bipartisan board, like the Federal Communications Commission or the Consumer Product Safety Commission, Congress decided to have the CFPB led by a single Director, removable only for inefficiency, neglect, or malfeasance.
“The CFPB Director’s insulation from removal by an accountable President is enough to render the agency’s structure unconstitutional.” But there are at least two other problems. While the President nominates the head of CFPB, the Director has a five-year term. In fact, it’s entirely possible that the President elected in 2028 “may never appoint one.”
Further, “The CFPB’s receipt of funds outside the appropriations process further aggravates the agency’s threat to Presidential control. The President normally has the opportunity to recommend or veto spending bills that affect the operation of administrative agencies.” Not here. The Director gets over $500 million per year directly from the Federal Reserve. The Court, however, severed the unconstitutional for-cause removal provision from the rest of the statute, leaving the rest of CFPB’s enabling statute intact.
In separate litigation, NCLA has objected to CFPB’s structure on behalf of its client in Law Offices of Crystal Moroney, P.C. v. CFPB et al. Moroney, like Seila Law, offers debt-related legal services to clients. NCLA asserted constitutional and due process claims on behalf of Moroney. While the Supreme Court’s Seila Law decision means that Crystal Moroney has won her structural constitutional argument against CFPB, another issue lurks. Does CFPB’s method of funding violate Article I, Section 1 of the U.S. Constitution, which vests all legislative power in Congress (i.e., the nondelegation doctrine)? If CFPB is unconstitutionally funded, that might well be a harder problem to disentangle from the rest of the enabling statute.
NCLA released the following statements:
“The unelected and unaccountable CFPB Director has been described as the ‘2nd most powerful person in Washington, DC,’ a situation created when Congress decided to insulate this particular agency head from any oversight by our elected officials. Fortunately, the Supreme Court understood that this structure violates the very foundation of our Republic, ruling that it is the President who is the head of the executive branch, and all executive branch officials are answerable to him. Today’s ruling is a win for Constitutional order.”
—Harriet Hageman, NCLA Senior Litigation Counsel
“Because the Court mistakenly left the rest of the statute intact, it has created an entirely new problem that may be even more constitutionally pernicious than the first. The President now has total control over an agency with a direct pipeline to Federal Reserve funds, without any appropriations control from Congress. This unconstitutional setup should be struck down at the Court’s first opportunity.”
—Michael P. DeGrandis, NCLA Senior Litigation Counsel
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
December 19, 2019 | NCLA Lawsuit Says CFPB Is Funded Unconstitutionally—Congress Cannot Divest Legislative Power
Washington, DC (December 19, 2019) – The New Civil Liberties Alliance has filed a lawsuit in the U.S.District Court for the Southern District of New York challenging the funding mechanism for the Consumer Financial Protection Bureau (CFPB) as unconstitutional. Specifically, NCLA alleges that Congress unlawfully divested its legislative appropriations power when it gave CFPB the ability to draw funding directly from the Federal Reserve, without annual appropriations from Congress and without oversight from the appropriations committees of Congress. By giving the power of the purse—a core legislative power—over to an executive branch agency, Congress violated Article I of the Constitution, which vests ALL legislative power in Congress, including appropriations power.
This case, entitled Law Offices of Crystal Moroney v. Bureau of Consumer Financial Protection, may ultimately provide the U.S. Supreme Court the opportunity to revive the Nondelegation Doctrine that five justices expressed interest in revisiting earlier this year in the wake of last June’s Gundy v. United States decision.
NCLA also contends that CFPB acted beyond its constitutional authority when it targeted Ms. Maroney’s Law Firm with a Civil Investigative Demand, withdrew that CID on the cusp of her federal court hearing challenging it, and then promptly issued a new CID practically identical to the original one as soon as the case was dismissed as moot. The complaint asks the Court to redress this fundamental denial of Crystal Moroney’s right to due process.
Finally, the case also preserves the objection that Congress may not vest executive authority in CFPB, an independent agency led by a single director, while also shielding that agency’s director from Presidential oversight and removal. Such a regime clearly violates the President’s constitutional duty to “take Care” that the laws are faithfully executed. That objection to CFPB’s structure is pending at the U.S. Supreme Court in Seila Law, LLC v. CFPB. NCLA filed an amicus curia brief in that case this week too, arguing that the President must have the power to remove any federal officer who exercises executive power.
NCLA released the following statements: “Crystal Moroney and the law firm she has built are victims of the Administrative State. Her plight is all too familiar to those of us fighting to restore constitutional constraints on federal agencies. On the bright side, her case will afford an excellent opportunity to call into question the highly irregular—and almost certainly unconstitutional—way in which Congress has funded CFPB.”— Mark Chenoweth, NCLA Executive Director and General Counsel
“This case illustrates what happens to civil liberties when an administrative agency lacking anysemblance of control or oversight from the executive or legislative branches turns on the citizens it purportedly exists to serve. Only the judicial branch can vindicate Ms. Maroney’s civil liberties by restoring accountable,constitutional government.” — Michael P. DeGrandis, NCLA Senior Litigation Counsel
“The serial investigations of the Plaintiff expose the CFPB’s cynical investigatory practices andreprehensible litigation tactics for what they truly are—brazenly unconstitutional abuses of process. It is longpast time for CFPB to face the judicial scrutiny that it has so contemptuously circumvented over the last twoand a half years.” — Jessica Thompson, NCLA Litigation Counsel
ABOUT NCLA – NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protectconstitutional freedoms from violations by the Administrative State. NCLA’spublic-interest litigation andother pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a newcivil liberties movement that will help restore Americans’ fundamental rights.For more information, visit us online: NCLAlegal.org.
OPINION
August 27, 2020 | Out of the Separation-of-Powers Frying Pan and Into the Nondelegation Fire: How the Court’s Decision in Seila Law Makes CFPB’s Unlawful Structure Even Worse
The U.S. Supreme Court’s June 29, 2020 decision in Seila Law LLC v. Consumer Financial Protection Bureau fixed a glaring constitutional defect in the way Congress structured the Consumer Financial Protection Bureau (CFPB or Bureau). “[D]eviat[ing] from the structure of nearly every other independent administrative agency in our history,” the 111th Congress made the CFPB’s director a solo principal officer whom the president could not remove absent inefficiency, neglect, or malfeasance. The Supreme Court would have none of it.
Although the Court did not revisit its prior decisions tolerating some limits on presidential removal power, including Humphrey’s Executor v. United States and Morrison v. Olson, it refused “to extend those precedents to the novel context of an independent agency led by a single Director.” Thus, it held that the leadership “structure of the CFPB violates the separation of powers.”
Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh joined the first three parts of Chief Justice John Roberts’s opinion for the Court, including Part III, which spelled out the CFPB’s structural separation-of-powers violation. Justices Alito and Kavanaugh also joined in Part IV’s remedy, which converted the director position to one removable at the president’s will. Justices Elena Kagan, Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor disputed the separation-of-powers violation but concurred in the judgment to sever the director’s for-cause removal protection. Oddly then, the decision featured a 5–4 split on the rationale, but a 7–2 alignment on the remedy.
Although this intended “fix” enabled the CFPB to live to fight another day, the Bureau is still on the ropes because the decision simultaneously exacerbated a second constitutional defect in the agency’s design that was not before the Seila Law Court. Namely, CFPB’s funding regime cuts Congress itself out of the Bureau’s annual appropriations process. By divesting its core Article I appropriations power in this way, Congress crossed a forbidden line. Seila Law worsens this constitutional problem: by eliminating the CFPB director’s for-cause removal protections, Seila Law effectively transfers Congress’s appropriations power from an independent director to the president himself. Thus, after Seila Law, the ramifications of Congress divesting its core constitutional powers are worse than ever.
The Problem: CFPB’s Funding Structure Violates Article I Nondelegation Principles
The appropriations power is a core legislative power. Yet Title X of the Dodd-Frank Act cedes Congress’s funding authority. Upon letter-demand from the CFPB’s director, the Federal Reserve Board of Governors must transfer a portion of funds from the combined earnings of the Federal Reserve System (not to exceed 12 percent annually, plus employment cost index increases) to finance the CFPB’s operations. The precise amount transferred each year is whatever the director determines “to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year.”
Not only must the Federal Reserve surrender earnings upon the agency’s demand without any scrutiny or review by the Board of Governors, but Title X also prohibits the Appropriations Committees of the U.S. House of Representatives and the Senate from reviewing funds the CFPB draws from the Board. No other executive branch entity is permitted to set its own level of funding. This unprecedented set of delegations and abnegations creates an unchecked, self-sustaining funding island—cut off from the constitutional mainland.
This funding structure is unconstitutional. Article I’s Vesting Clause is unequivocal: “All legislative Powers herein granted shall be vested in a Congress of the United States” (emphasis added). These words mean that “Congress . . . may not transfer to another branch ‘powers which are strictly and exclusively legislative.’” What power the people have vested in the legislature through the Constitution—including the core legislative authority to appropriate the expenditures of federal agencies—Congress may not divest.2
In addition, the Constitution commands that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Congress’s responsibility to appropriate, often called “the power of the purse,” serves the “fundamental and comprehensive purpose” of “assur[ing] that public funds will be spent according to the letter of the difficult judgments reached by Congress as to the common good.” Alexander Hamilton explained that any deviation from the Article I, § 9 appropriations process is antithetical to the Constitution’s design:
The design of the Constitution in this [Appropriations Clause] provision was, as I conceive, to secure these important ends—that the purpose, the limit, and the fund of every expenditure should be ascertained by a previous law. The public security is complete in this particular, if no money can be expended, but for an object, to an extent, and out of a fund, which the laws have prescribed.3
Even the Court’s enfeebled nondelegation doctrine requires that Congress cannot delegate legislative power without articulating an “intelligible principle” that guides the executive branch’s discretion in applying the law. The CFPB believes that it meets this requirement easily.4 First, it notes, the Bureau’s funding is appropriated by law (albeit a 2010 law that operates indefinitely into the future, unlike other appropriations, which operate annually). Second, it says that the statute specifies an exact formula to determine the ceiling for CFPB funding, so it is neither vague nor indeterminate (even though it allocates monies from the Federal Reserve rather than the U.S. Treasury, unlike any other appropriation). Finally, apologists claim that courts should look more favorably on Congress when it ties its own hands than when it tries to seize executive power. Besides, they add, Congress can always increase or decrease the CFPB’s annual funding by passing a new law.
But these arguments hardly resolve the problems with the CFPB’s financing. Could Congress, by law, simply direct that the president may spend up to 50 percent of all Federal Reserve funds on enforcing some other set of laws? How about 100 percent? If so, that would turn the entire constitutional structure on its head. Having the president direct 12 percent of those funds, as Title X now does, causes the same kind of constitutional harm. Congress may not pass a law leaving it up to federal agencies how much money they are going to spend without unlawfully divesting core legislative appropriations power.
The law’s specificity does not cure the fact that the appropriation is merely a ceiling. The Bureau may request any amount it sees fit up to a predetermined ceiling, and the Federal Reserve must turn over that requested amount without questioning it. Congress has thus surrendered its power to set the actual funding level to the CFPB itself. Given that the spending power is instrumental to Congress’s ability to rein in executive branch excesses, delegating control over funding levels is unquestionably a divestment of legislative power.
Nor can Congress necessarily change the Bureau’s funding level and thus avoid unlawfully delegating its appropriations power. If a future Congress wishes to raise or lower CFPB’s funding ceiling—or perhaps replace the ceiling with a fixed amount of annual funding—it cannot do so without the president’s signature on a new law. And the president has very little incentive to agree to reducing his power over this stream of funding. In effect, then, by enacting the CFPB’s present funding structure, the 111th Congress tied the hands of every future Congress, subject to two-thirds majorities in both houses of some future Congress overriding a presidential veto. This is no mere “delegation” of power, a misleading term that implies the unilateral ability for Congress to reverse its grant of authority; this is an outright divestment of power.
It is worth noting that this divestment of congressional power was likely intentional. Rather than make the Bureau’s funding subject to the give and take of the annual appropriations process, like every other non-entitlement expenditure, Congress decided to put the CFPB’s funding off limits in exchange for surrendering its own future spending power. The Democrat majority in the 111th Congress was at a high-water mark of fifty-nine senators, a dominance not seen since Jimmy Carter lost re-election to Ronald Reagan (and not seen since the 111th Congress, either). A funding mechanism that indefinitely surrenders power to a complicit executive, in order to instantiate the legislative will of a transient majority in Congress—and tie the hands of future congresses—is undoubtedly clever. But it is nonetheless a bargain that the Supreme Court must unwind because it unconstitutionally divests Article I power.
If Title X of Dodd-Frank does supply an “intelligible principle” under current doctrine, then that is a powerful indictment of existing law. No proper interpretation of Article I, § 1 can permit Congress to delegate a core legislative power like the power of the purse.
How Seila Law Makes CFPB’s Nondelegation Problem Worse
If the Court was not already poised to reject the CFPB’s funding structure before, it certainly ought to be in the aftermath of Seila Law. Perhaps unwittingly, the Court’s decision has made the CFPB’s funding regime even less tenable. How? After Seila Law, the president, without input from Congress, is the final authority on the amount of the CFPB’s funding: because the president can now remove the director of the Bureau at will, the director’s preferences in this regard will only matter as much as the president allows.
Hence, by severing the director’s for-cause removal protection, the Supreme Court has put the president more or less directly in charge of over 12 percent of the funds generated by the Federal Reserve each year: more than $650 million in fiscal year 2020. Title X of Dodd-Frank unconstitutionally ceded Congress’s exclusive funding authority to the CFPB. But Seila Law has now changed the law so that it cedes core appropriations power directly to the President of the United States. It would be difficult to construct a more direct violation of the nondelegation doctrine. And remember that the law does not allow the House or Senate Appropriations Committees to review how those funds are spent. If the line-item veto was unconstitutional, then a fortiori turning over this much appropriations control to the president must be unconstitutional too.
To better understand the breathtaking scope of legislative power now ceded the president, consider the following thought experiment: Suppose President Donald Trump instructed the Bureau’s director to request only one dollar for the next quarter of its operations. Could he do that? Nothing in Title X or Seila Law appears to preclude such a move. Congress might object that that sum is less than “reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law.” But how would Congress enforce such a belief, after having ceded to the director the authority and discretion to decide how much funding to request? Thus, President Trump could cripple the entire agency by unilaterally defunding it. He could not withhold appropriated funds from any other agency due to the Impoundment Control Act. Indeed, his purported violation of that Act in (temporarily) withholding appropriated funds from Ukraine formed the basis of the first article of impeachment lodged against him.
Someone might contend that such an action would not be taking care that the laws are faithfully executed, but why not? If President Trump were to conclude that the agency’s funding structure is unconstitutional—which it surely is—then perhaps defunding the agency would be the most faithful legal action he could take. In any event, the fact that the president could effectively zero out funding for the agency (by directing that it request one dollar from the Federal Reserve) illustrates the inherent structural problem that Seila Law has created. Whether as a violation of Article I, § 1’s prohibition on divesting legislative power, or as a breach of the separation of powers, the CFPB’s funding regime violates the Constitution.
CFPB’s Unconstitutional Funding Structure Is Uniquely Egregious
As the Supreme Court emphasized in finding a separation-of-powers violation in Seila Law, “‘[p]erhaps the most telling indication of [a] severe constitutional problem’ with an executive entity ‘is [a] lack of historical precedent’ to support it.” And there is no historical precedent for the CFPB’s single-director, for-cause removal structure; nor is there any antecedent for its sui generis funding structure. Before the CFPB, Congress had never funded a presidentially controlled agency outside the appropriations process.
Title X does not fund the CFPB through the constitutionally prescribed process of congressional enactment via bicameralism and presentment. Rather, as Chief Justice Roberts notes, “the Director receives [over $650 million per year] from the Federal Reserve, which is itself funded outside of the annual appropriations process.” Thus, the president and the CFPB enjoy two layers of financial independence, since Congress does not appropriate the Federal Reserve’s earnings, either. In Seila Law, the Court observed that“[u]nlike most other agencies, the CFPB does not rely on the annual appropriations process for funding. Instead, the CFPB receives funding directly from the Federal Reserve, which is itself funded outside the appropriations process through bank assessments.” This double layer of insulation from congressional appropriations is a unique and constitutionally suspect feature of the CFPB’s structure.
Prior to the Supreme Court’s decision in Seila Law, these dual layers of protection (constitutional or not) were at least consistent with Congress’s original conception of the CFPB as an agency independent of executive and legislative control. But in applying its severability remedy, Seila Law has made the Bureau’s director removable at will. So, in effect, Title X now provides the president himselfunfettered access to, and control over, 12 percent of annual Federal Reserve receipts: $695.9 million in fiscal year 2020. And because “the CFPB Director has the authority to bring the coercive power of the state to bear on millions of private citizens and businesses, imposing even billion-dollar penalties,” so too now does the president.
To be sure, there are other agencies over whose funding the president exerts fairly direct control, most notably the Executive Office of the President (EOP). Still, Congress funds the EOP (to the tune of about $750 million in fiscal year 2020) through the constitutionally prescribed appropriations process, and the appropriations committees on Capitol Hill oversee the EOP’s spending. The president must ask Congress for a certain level of EOP funding, and Congress chooses whether to fund it at that level. The EOP does not dictate its own level of spending.
There are also other agencies whose funding does not come directly from Congress. For example, the Federal Housing Finance Agency (FHFA) is funded through the Financial Stability Oversight Council, a division of the Treasury Department, which receives most of its funding from fees and assessments on large banks. Despite the FHFA’s similar constitutional structure, its funding mechanism differs from the CFPB in that it is self-funded through assessments levied against regulated entities, not a demand on the Federal Reserve. Moreover, unlike the CFPB, the FHFA “regulates primarily Government-sponsored enterprises, not purely private actors.”5
Likewise, the Federal Reserve itself may “levy semi-annually upon the Federal reserve banks . . . an assessment” (emphasis added). Also, the Federal Deposit Insurance Corporation (FDIC) may require that “[a]ny institution that becomes insured by the [FDIC] . . . shall pay the [FDIC] any feewhich the [FDIC] may by regulation prescribe” (emphasis added). The National Park Service “may establish, modify, charge, and collect recreation feesat Federal recreational lands and waters” (emphasis added). And the United States Postal Service may collect “all revenuesreceived by the Postal Service” (emphasis added).
But each of these examples differs from the CFPB’s case in a key respect: The fees, assessments, or investments are collected from users of governmental programs to self-fund those same programs. They are not collected to fund operations at third-party agencies without congressional oversight. Moreover, in each of these examples, the governmental entities do not have broad investigative and enforcement authority.6 The CFPB is not self-funded through the collection of “fees, assessments, or investments” from users or beneficiaries of its products or services. Rather, the CFPB makes a demand of the Federal Reserve, which the Federal Reserve cannot refuse, challenge, or modify. Moreover, unlike self-funded entities, the CFPB administers nineteenfederal statutes, including a statutory prohibition against “any unfair, deceptive, or abusive act or practice” in the area of consumer finance. To accomplish this wide-ranging mandate, the CFPB may promulgate binding regulations. The Seila Law Court noted that Congress also vested the CFPB with potentenforcement powers. The agency has the authority to conduct investigations, issue subpoenas and civil investigative demands, initiate administrative adjudications, and prosecute civil actions in federal court. To remedy violations of federal consumer financial law, the CFPB may seek restitution, disgorgement, and injunctive relief, as well as civil penalties of up to $1,000,000 (inflation adjusted) for each day that a violation occurs.
The CFPB’s rulemaking and enforcement powers are coupled with extensive adjudicatory authority. The agency may conduct administrative proceedings to “ensure or enforce compliance with” the statutes and regulations it administers. When the CFPB acts as an adjudicator, it has “jurisdiction to grant any appropriate legal or equitable relief.” The “hearing officer” who presides over the proceedings may issue subpoenas, order depositions, and resolve any motions filed by the parties. No other government agency has this much power to regulate, investigate, adjudicate, and punish, while simultaneously enjoying the authority to fund itself without consulting the people’s representatives.
To the extent Chief Justice Roberts’s opinion in Seila Law exhibited any concern with the CFPB’s funding structure, it was with the statute’s attempt to excessively constrain presidential power: “The CFPB’s receipt of funds outside the appropriations process further aggravates the agency’s threat to Presidential control. The President normally has the opportunity to recommend or veto spending bills that affect the operation of administrative agencies.” But it is hardly a solution to the nondelegation problem to switch from cutting the president out of the loop to putting him entirely in charge of the Bureau’s appropriations. By altering Title X of Dodd-Frank to cure the CFPB’s separation-of-powers problem, the Supreme Court jumped out of an unconstitutional Article II frying pan right into an unconstitutional Article I fire.
Where Will the Court Go from Here?
It is only a matter of time before the Supreme Court reviews a direct constitutional challenge to the CFPB’s funding structure. When it does, the Court will have to consider its options carefully. Unlike in Seila Law, severability will not be the remedial path of least resistance. It is not obvious what could be severed to fix the nondelegation problem. If the Court were to sever the funding stream from the Federal Reserve, for example, it would disable the agency. The Court cannot very well order Congress to fund the Bureau from another source or to fund it through normal appropriations or even to rewrite the funding provisions of the Dodd-Frank statute. It could strike down the current method of funding as unconstitutional but stay the mandate to give Congress time to address the issue. Or, it could strike down Title X in its entirety, though this Court is unlikely to take a step that bold.
Another alternative would be to adopt something along the lines of the proposal advanced by Justices Thomas and Gorsuch in the Seila Law case. That is, the Court could refuse to enforce whatever order has been appealed to the Supreme Court and signal that so long as the CFPB’s unconstitutional funding structure remains intact the Bureau can expect to find all of its similar orders unenforceable whenever a constitutional objection is raised. That remedy would throw the solution back to Congress too, but it would be more of a slow burn that counts on the measured pace of litigation to create space for reform.
A third option, which seems less plausible on its face but resembles the ersatz solution the Supreme Court contrived in Gundy v. United States, would construe the statutory ceiling put in place by Congress as the mandatory amount of appropriation for the Bureau each year. By removing the CFPB’s ostensible control over the amount of funding it receives, this solution would address the “leaving the amount up to the president” nondelegation problem. But it would still leave the president in control of significant funding without congressional oversight. Conversely, as the chief justice pointed out, it would also deny the president his constitutionally assigned opportunity to veto the annual appropriation. Also, Congress did not set the ceiling as the appropriations amount. It clearly conferred discretion. The Court does not have any more power to set an alternative appropriations level that Congress did not in fact establish than the CFPB or the president does.
Whatever course the Court follows, it need not worry that striking down the CFPB’s funding structure will portend dramatic change for how other agencies are funded. The CFPB’s structure is unique and easily distinguished by the dual layers of insulation from the appropriations process.
Whether the Federal Reserve or other rare agencies funded outside the appropriations process are constitutional can be saved for another time. Here, Congress innovated further and came up with a funding mechanism twice removed from the congressional appropriations process. Surely that degree of insulation from the appropriations process violates the separation of powers, the nondelegation doctrine, or both—whether or not an agency once removed from the appropriations process (like the Federal Reserve) does so. Even where the Supreme Court has permitted some divergence from the constitutional scheme for structuring federal agencies, it has invalidated those that provide a double layer of removal from constitutional strictures.
Conclusion
Seila Law fixed the removal problem with the CFPB’s director, but the Court’s “fix” may have sealed the agency’s fate. While repairing the CFPB’s infringement upon the president’s Article II powers, converting the director into an at-will principal officer worsens the constitutional defects of the Bureau’s financing regime.
Post-Seila Law, the CFPB’s unchecked authority not only conflicts with the congressional statutory design and purpose but is inconsistent with the Constitution’s design and purpose. The Founders vested Congress with control over spending and lawmaking.7 Because Article I, § 1 vests all legislative power in Congress, Congress may not subdelegate any of that power to the CFPB. But the portions of Title X that survived the Supreme Court’s blue-penciling in Seila Law permit the president to determine the CFPB’s funding and budget, to direct the agency’s “authority to promulgate binding rules fleshing out 19 federal statutes,” and to wield the CFPB’s “potent enforcement powers.” Unconstrained by constitutional checks and balances, these powers consolidated in the executive branch can now be used by the current president and his successors—for good or for ill.
Even before the Seila Law decision, serious doubts existed about the constitutionality of the Bureau’s funding mechanism because “[t]he nondelegation doctrine bars Congress from transferring its legislative power to another branch of Government.” The power of the purse is a core legislative power. And in Title X of Dodd-Frank, Congress traded away that power to move the Bureau’s funding beyond future congressional—and, it thought, future presidential—control. This, Congress may not do.
Indeed, Congress may finally have devised a delegation of power that is so complete and so extraordinary that the Supreme Court will be forced to confront and unwind it. It may even be forced to reinvigorate the nondelegation doctrine—and abandon the intelligible principle fiction—to do so. Because the Bureau’s funding regime is unprecedented, the Court will not have to worry about disturbing other agencies that have longstanding historical pedigrees. But Seila Law has left the Court no choice but to take another critical look at the CFPB’s unique constitutional defects. Having rescued the Bureau from the separation-of-powers frying pan, the Court has dropped it into a nondelegation fire that is anathema to the constitutional order of government. Unless the Court takes up its unfinished business soon to resolve this untenable situation, this agency will “slip from” the legislature’s “control, and thus from that of the people.”8
Originally published in The University of Chicago Law Review on August 27, 2020.