The CFPB is not unique as an agency that is not funded by the US Court of Appeals: a case study of an accountant v. Cochran
Two arguments that will be heard on November 7 could make it easier to challenge the constitutionality of the Securities and Exchange Commission. The justices have to decide if it’s good for businesses and people to fight in federal court before they can be regulated.
The second case, Securities and Exchange Commission v. Cochran, concerns an accountant accused of misconduct by the S.E.C. and involves a similar issue. The accountant, Michelle Cochran, sought to challenge the agency’s structure in federal court before administrative procedures were completed. The Fifth Circuit agreed that she should be able to bring her claims, creating the sort of conflict between federal appeals courts that often prompts Supreme Court review.
On Nov. 8, the justices will consider whether states can require corporations to agree to be sued in that state’s courts as a condition of doing business in the state.
The way the bureau is funded was ruled to violate the constitution by a three judge panel of the 5th US Circuit Court of Appeals.
But while those decisions did change the who, in terms of who runs these agencies, they did not take away the agencies’ powers. Now comes a lower court decision that essentially invalidates the whole mission of the CFPB.
Some conservatives were not pleased with the behavior of the CFPB. Congress established it after the financial crash to protect consumers from predatory practices by financial institutions. The particular rule in this case involves some of the practices of payday lenders.
If the ruling stands, it’s possible that the bureau would need an annual budget approved by Congress, which would make itvulnerable to lobbying to weaken consumer protections.
Peterson says the CFPB is not unique as an agency that does not receive its annual funding determined by Congress — the Federal Reserve and the Federal Deposit Insurance Corporation both are funded in other ways.
In the meantime, he says it raises doubt about all sorts of other rules that the bureau has in place, because at least in the region of the 5th circuit – Texas, Louisiana, and Mississippi – other CFPB rules could be challenged with similar lawsuits.
There will be a lot of confusion about if the rules for mortgage loans, debt collection, credit cards are still viable down in the Fifth Circuit.
In its brief to the Supreme Court, the Biden administration noted that even programs like Social Security and Medicare are paid for by mandatory spending, not annual appropriations.
“This marks the first time in our nation’s history that any court has held that Congress violated the Appropriations Clause by enacting a law authorizing spending,” wrote the Biden administration’s Solicitor General Elizabeth Prelogar.
Conservatives who have long opposed the modern administrative state have previously challenged laws that declared heads of agencies can only be fired for cause. In recent years, the Supreme Court has agreed and struck down many of those provisions. The court has held that administrative agencies are essentially creatures of the Executive Branch, so the president has to be able to fire at-will and not just for cause.
The White House aide who created the Consumer Financial Protection Bureau was now U.S. Senator Elizabeth Warren. Lower courts have previously upheld the validity of theCFPB, she stated Monday.
“If the Supreme Court follows more than a century of law and historical precedent,” she said, “it will strike down the Fifth Circuit’s decision before it throws our financial market and economy into chaos.”