The Supreme Court on Tuesday heard arguments in a case that will determine the constitutionality of the Consumer Financial Protection Bureau. For years, conservatives and libertarians have been arguing that the bureau is unconstitutionally constituted — and not just in terms of the original setup that made it functionally impossible to fire its director, but in its funding structure.
However, Tuesday’s arguments and questions from the justices — even conservative justices — strongly indicate that the court is more likely to side with progressives than the majority’s philosophical kin.
Justice Brett Kavanaugh seemed especially dismissive of the idea that CFPB’s non-congressional-appropriations-based funding structure is unconstitutional, stating, “If the majority of the Congress said they were not going to fund the agency tomorrow, they could do that.”
Even Clarence Thomas seemed somewhat skeptical of the anti-CFPB side’s argument, asking of its lawyer, Noel Francisco, “I’d like you to complete this sentence: Funding of the CFPB … violates the appropriations clause because….”
Reading the tea leaves, it looks like the CFPB is here to stay, even if it is a bit defanged — both because of the justices’ skepticism and because bills such as that of Sen. Ted Cruz (R-TX) to eliminate it are dead on arrival. But that does not mean CFPB cannot, or should not, be reformed. Here are some ways conservatives and libertarians might seek to do that through Congress.
The most obvious pathway forward is reforming the CFPB to place the agency under the normal congressional appropriations process. This is what Rep. Andy Barr’s (R-KY) TABS Act would do, and it would allow Congress to pressure CFPB to, for example, take more aggressive action in terms of addressing the unauthorized leak of more than 250,000 consumers’ data by a CFPB employee about six months ago, or ensure that CFPB really does put a stop to alleged racist behavior that has reportedly continued even under Director Rohit Chopra’s leadership. The latter concern has existed going back to the days of the Obama administration, and it is alleged to have continued into 2022. Both a situation that amounted to a theft of consumer data by a CFPB employee and supposed issues of serious racial bias at CFPB are things Democrats care about as well as Republicans, and it’s plausible to believe CFPB would be more responsive in addressing those problems if it had a more normal funding stream.
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The Consumer Financial Protection Commission Act would also stop the CFPB from being funded by the Federal Reserve and “establish a bipartisan, five-person commission” instead of having a sole director. A variation on this would be to stop Fed funding of CFPB under certain conditions, per last Congress’s Federal Reserve Loss Transparency Act. That bill would tweak the Consumer Financial Protection Act of 2010 to bar the Fed from funding CFPB if Federal Reserve banks show an operating loss and mandate that the Fed use generally accepted accounting principles.
But there are other reforms worth considering, too. Two would be passage of bills introduced by Rep. Tom Emmer (R-MN): the CFPB Dual Mandate and Economic Analysis Act and the CFPB Whistleblower Incentives and Protection Act. The first of these would, according to Emmer, “amend the mission of the CFPB to direct its attention to competition and consumer choice while maintaining an emphasis on fairness and transparency” and “establish an Office of Economic Analysis” to review bureau actions and how any given “action would impact consumer choice, price and access to financial products.” This in turn would mean CFPB has to get public comment on its actions and allow for better oversight and input by the public.
The second would do exactly what it says on the tin: “provide awards to whistleblowers who report information in relation to a violation of consumer financial law resulting in sanctions exceeding one million dollars. The bill would also establish requirements regarding the legal representation of whistleblowers, including allowing for whistleblower confidentiality.” It’s hard to see how Democrats could universally oppose the latter of these, at least.
A final option would be the CFPB-IG Reform Act, which would mandate CFPB have a dedicated, agency-exclusive Office of Inspector General and that the inspector general be Senate confirmable. Again, that’s a bill that would be politically tough for Democrats to oppose.
Whether one or many of these options might appeal, it looks like Congress is going to have to take the initiative and get on with reforming the CFPB through actual legislation. As with Obamacare, it does not appear that the Supreme Court is going to save legislators from doing the hard work to rein in a regime conservatives and libertarians believe is out of control. The best answer, as is almost always the case, will be for Congress to do its job — painful and scary as that is for many members who love the limelight and political posturing, but hate casting actual votes that may prove controversial.
Liz Mair is the founder, owner, and president of Mair Strategies, a boutique strategic communications firm with offices in six U.S. metropolitan areas.
