Constitutional Problems With the CFPB
By Zachary Rogers
The Financial Product Safety Commission Act of 2018 is a bipartisan attempt to reform the structure of the Consumer Financial Protection Bureau. The bill would eliminate the single-director structure and instill a bipartisan commission of five commissioners. The better solution would be to make the director removable by the executive, and the constitutional solution would be to do away with the agency altogether.
The Consumer Financial Protection Bureau as structured is a threat to liberty, inconsistent with historic practice, and unjustified by precedent. The agency violates the Constitution in three ways: the non-delegation doctrine, combination of functions, and the unitary presidency. Therefore, the CFPB should, at the least, be made an executive agency with its director removable at will by the president, and its organic statute should be revised to curb the power of the agency and remove its independence from the congressional power of the purse.
The CFPB was formed in 2011 as part of the Dodd-Frank Act of 2010 that was itself a response to the financial crisis of 2007-08. Its purpose is to provide consumer protection in the financial sector and curb perceived abuses that led to the crisis.
The CFPB Violates the Unitary Executive
The CFPB, unlike traditional independent agencies, is headed by a single director. He wields immense unilateral authority and is unaccountable to either the president or his fellow commissioners. This violates precedent because, historically, independent agencies have been headed by multi-member commissions. The single-director structure without accountability poses the risk of capricious decision-making and the abuse of power. This is not the only constitutional violation.
The CFPB Violates the Congressional Power of the Purse
The CFPB is exempt from the congressional power of the purse. Under the Dodd-Frank Act, the board of directors of the Federal Reserve may transfer an amount, up to 12% of the total operating expenses of the Federal Reserve System, to the CFPB.
The CFPB Violates the Separation of Powers
The director’s authority to legislate, adjudicate, and enforce judgments violates the separation of powers principle. His agency creates regulations, enforces regulations, and, upon appeal, the director adjudicates upon those regulations and the actions of his subordinates. This is a recipe for arbitrary and self-interested adjudication.
The CFPB exemplifies the administrative state. First, Congress delegated legislative power to an agency. Second, the agency violates the separation of powers by combining legislative, executive, and judicial functions. Third, it is an independent agency unaccountable to the president. This hinders both the president’s ability to faithfully execute the laws and minimizes government accountability to citizens.
It is time for Congress to act and at the very least bring this powerful agency more in line with the Constitution. An excellent starting point would be to make the leadership of this executive agency subject to the president’s removal power. Conservatives often claim to desire to return to the government of the Founders. This is a practical place to start. It will not be an easy battle, but the fight for liberty rarely is.