Consumer Financial Protection Bureau v. Community Financial Services Ass’n of America

THE TEXT AND PURPOSE OF THE APPROPRIATIONS CLAUSE

The Consumer Financial Protection Bureau (“CFPB”) argues that the text of the Appropriations Clause permits the CFPB’s funding structure. Brief for Petitioners at 14. In support, the CFPB asserts that the Appropriations Clause, which reads “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law,” merely ensures that Congress has exclusive control over the Federal Government’s spending. Id. at 14–15. The CFPB emphasizes that the Appropriations Clause is a grant of power designed to prevent the Executive Branch from spending freely, not a restriction on how Congress can spend the Federal Government’s funds. Id. at 16. The CFPB elaborates that “appropriations,” in both historical and modern understandings of the word, broadly refers to any law that allocates funding, supporting the idea that Congress was given broad discretion to spend. Id. at 16–17. Further, the CFPB maintains that the Constitution only contains a single limitation of the appropriations power—funds for an army cannot be allocated for more than two years at a time. Id. at 17. The CFPB concludes that this sole limitation reinforces that the appropriations power is otherwise unrestricted because the Framers showed they could limit the appropriations powers when they felt it necessary. Id. at 18.

In contrast, Community Financial Services Association of America, Limited et al. (“CFSA”), argues that the CFPB’s funding structure violates the Appropriations Clause. Brief for Respondents, Community Financial Services Association of America, Limited et al. (“CFSA”) at 11. CFSA contends that the text of the Appropriations Clause requires that Congress specify the amount of money the Federal Government may spend, and, implicitly, that any law authorizing funding must respect the separation of powers. Id. at 26. While CFSA agrees with the CFPB that appropriations are exclusively a legislative power, CFSA maintains that allowing the CFPB to determine the amount of its own funding constitutes an unconstitutional delegation of this legislative power. Id. at 28–29. CFSA submits that this delegation is unconstitutional like the House of Representative’s “clearly legislative” ability to veto the Attorney General’s deportation decisions, which was ruled unconstitutional in INS v. Chadha. Id. at 29. Further, CFSA says that the CFPB’s funding structure would fail the intelligible principle standard under Mistretta v. United States because the statute’s grant to the CFPB Director to request necessary funds does not give an intelligible principle for the judiciary to determine if the Director is requesting the correct amount of funds. Id. at 29. CFSA invokes separation of powers concerns, emphasizing that the CFPB’s ability to set its own budget presents a dangerous combination of the legislative purse and the executive sword. Id. at 16.

HISTORICAL PRACTICE AND PRECEDENT

The CFPB argues that its funding structure is well represented in the Federal Government’s past practice. Brief for Petitioners at 18. Specifically, the CFPB asserts that Congress has broad authority to set the “specificity, duration, and source of appropriations.” Id. at 19. Regarding specificity, the CFPB maintains that Congress has often given the Executive Branch authority to spend up to a specified cap for general purposes, like the CFPB’s funding structure. Id. The CFPB submits that spending caps have never faced serious judicial scrutiny because they allow the Executive Branch to respond flexibly to changing situations. Id. at 19–20. Regarding duration, the CFPB contends that Congress regularly passes statutes that fund programs indefinitely and outside of the traditional yearly appropriations bill. Id. at 21. The CFPB points out that some of these programs do not even have spending caps, like Social Security payments and civil damages against the Federal Government. Id. Regarding source, the CFPB emphasizes that Congress has an extensive history of funding programs through means other than traditional appropriation bills. Id. at 22. For example, the CFPB cites the Founding-Era Post Office, which was funded by selling services, and the National Mint, funded by fees. Id. Especially relevant here, the CFPB points to the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve Board which collect fees from entities they regulate in the amount they deem necessary to execute their missions. Id. at 23. The CFPB concludes that its funding structure is constitutional because it contains a spending cap, is for a specified duration—indefinitely, and is from an enumerated source—the Federal Reserve’s proceeds. Id. at 25–26.

Also, the CFPB asserts that its funding structure is supported by Supreme Court precedent. Id. at 24. In support, the CFPB cites Cincinnati Soap v. United States, where the Supreme Court said that the Appropriations Clause merely requires Congress to act before federal spending occurs without placing any limits on what kinds of Congressional actions are acceptable. Id.

In contrast, CFSA counters that the CFPB’s funding structure is unprecedented, and that all the CFPB’s cited precedents are distinguishable. Brief for Respondents at 24. Regarding amount, CFSA argues that the CFPB’s examples of spending caps are disanalogous to the CFPB’s funding structure because those earlier examples were appropriated annually and closely tracked by Congress, which required detailed cost estimates from the Treasury. Id. at 30–31. The CFPB’s funding structure, CFSA contends, gives the CFPB too much discretion in drawing money from the Federal Reserve. Id. at 33. Regarding duration, CFSA maintains that Congress has never granted indefinite funding to an entity while allowing that entity to determine its own budgetary needs or evade Congressional oversight. Id. CFSA reexamines the CFPB’s example of funding Social Security benefits, concluding that, while the grant was indefinite, Congress specified the amount of spending the Social Security Administration could give to beneficiaries. Id. Regarding source, CFSA submits that the CFPB’s funding structure is unprecedented because it is not reliant on funding from the public or the entities it regulates. Id. at 34. CFSA posits that fee-funded entities like the Post Office were directly accountable to the public who could always refuse to engage with them. Id. at 36. CFSA maintains that similar concerns keep checks on organizations like the OCC and Federal Reserve, since the entities that they regulate could always withdraw from the industry if they disagree with their regulator’s actions. Id. at 36–37. In contrast, CFSA says, the CFPB is sheltered from public or political accountability because the Federal Reserve’s funds are not impacted by the CFPB’s decisions. Id. at 39–40.

Also, CFSA contends that Supreme Court precedent does not support the CFPB’s funding structure. Id. at 41. CFSA says that the CFPB relies on dicta from Cincinnati Soap, which is distinguishable from the present case because Cincinnati Soap involved dispersing funds to a territorial government and did not place the amount of funding dispersed into question. Id. at 41–42.

APPROPRIATE REMEDY

The CFPB argues that if the Supreme Court finds its funding structure unconstitutional, the Court should not vacate the Payday Lending Rule because the CFPB had statutory authority to enact the rule. Brief for Petitioners at 38. Instead, the CFPB submits that the Court should sever the funding structure provision and merely prevent the CFPB from spending funds to enforce future actions. Id. at 38–39. The CFPB asserts that vacating the Payday Lending Rule goes against public policy and equity concerns because all the CFPB’s rulings and actions over the past twelve years would be put in question. Id. at 46–47. The CFPB concludes that the uncertainty and confusion generated by vacating the Payday Lending Rule presents a strong reason to limit CFSA’s remedy to nonenforcement. Id. at 47–48.

In contrast, CFSA argues that the Supreme Court should vacate the Payday Lending Rule because it was issued using illegally sourced funds and was never in effect. Brief for Respondents at 46. CFSA submits that the CFPB’s suggested remedy would incentivize the Executive Branch to illegally enact rules in the first place. Id. at 49. CFSA says that the CFPB’s public policy concerns are overblown as there would be no effect from vacating the currently stayed Payday Lending Rule. Id. at 49–50. Further, CFSA adds that many of the CFPB’s other rules would stay in effect, as Congress could ratify them if it chooses to refund the CFPB, and many of the CFPB’s older rulings have seen their statute of limitations run. Id. at 50–51.