When Congress asked Pacific Legal Foundation for advice on how to reform one of our recent government adversaries, we were more than happy to oblige.
The House Financial Services Committee’s Subcommittee on Financial Institutions and Monetary Policy held a hearing Thursday on the Consumer Financial Protection Bureau (CFPB), a uniquely unconstitutional agency that lost to PLF client Townstone Financial in federal court late last month.
Jessica Thompson, a PLF litigator on that case, joined a five-person panel to discuss why CFPB, and the power it wields, is so problematic for the constitutional separation of powers.
Thompson’s testimony (which begins at about the 40-minute mark in the video above) honed in on a few key points. First, CFPB’s funding structure violates the Appropriations Clause, as it receives funding from the Federal Reserve, which is not appropriated by Congress. That puts the question of reform in an interesting light from the jump, since the agency itself is likely unconstitutional.
Further, CFPB’s practice of using consent orders as a form of rulemaking violates the Administrative Procedures Act and flies in the face of due process. This was exemplified in the Townstone case, where CFPB took a nearly 50-year-old regulation and applied it in a novel way to police the speech of Townstone Financial, which hosted a regular radio show. . On the program, hosts talked about mortgages as well as local news, including stories about crime. CFPB took five innocuous comments—pulled out of context from hundreds of broadcast hours—and used them as the basis for its enforcement action. This far exceeded the agency’s past use of the regulation, as well as any authority that CFPB could claim had been delegated to it by Congress. The judge made that clear in his decision, handing the win to PLF’s client.
In Thursday’s hearing, a couple fragments from Townstone’s radio comments were read aloud, for dramatic effect, in an attempt to malign Townstone and justify CFPB’s actions. But in her testimony, Thompson explained that she has listened to the full broadcasts in question, and that no discrimination was even alleged by CFPB. Further, the CFPB’s enforcement action violates the First Amendment.
But Thompson wasn’t there just to dish dirt on CFPB—plenty can do that, and for good reason. She also had solutions to offer the packed room of legislators and staffers
Congress can start by bringing CFPB under the regular appropriations process, like all other agencies with similar authority. There’s a chance that the U.S. Supreme Court may force the issue when it hears CFPB v. Community Financial Services Association of America, a case challenging that funding structure, in the next term But Congress should not use that as an excuse for delay; it should act now.
Once that funding fix is made, Congress can begin real oversight in earnest, reviewing the powers that have been delegated to CFPB and taking a closer look at how it exercises that authority.
Regular oversight is what we should expect from Congress, at a minimum. When the committees in either chamber are working at their best, they are engaged in hearings to conduct oversight of executive and so-called independent agencies. No matter the party in the White House or in the Speaker’s office, the legislature has a duty to push its own prerogatives as a branch. Oversight ensures that it has not allowed an agency to usurp its authority.
The case of Townstone Financial is one that the public knows about because the company and its people were willing to stand up and fight against government overreach. Although PLF will always be there to help those brave people take a stand, Congress must work to make sure that PLF will not have a long line of clients that need to challenge the CFPB and its unconstitutional actions.