The U.S. Supreme Court’s June 29, 2020 decision in Seila Law LLC v. Consumer Financial Protection Bureau fixed a glaring constitutional defect in the way Congress structured the Consumer Financial Protection Bureau (CFPB or Bureau). “[D]eviat[ing] from the structure of nearly every other independent administrative agency in our history,” the 111th Congress made the CFPB’s director a solo principal officer whom the president could not remove absent inefficiency, neglect, or malfeasance. The Supreme Court would have none of it.

Although the Court did not revisit its prior decisions tolerating some limits on presidential removal power, including Humphrey’s Executor v. United States and Morrison v. Olson, it refused “to extend those precedents to the novel context of an independent agency led by a single Director.” Thus, it held that the leadership “structure of the CFPB violates the separation of powers.”

Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh joined the first three parts of Chief Justice John Roberts’s opinion for the Court, including Part III, which spelled out the CFPB’s structural separation-of-powers violation. Justices Alito and Kavanaugh also joined in Part IV’s remedy, which converted the director position to one removable at the president’s will. Justices Elena Kagan, Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor disputed the separation-of-powers violation but concurred in the judgment to sever the director’s for-cause removal protection. Oddly then, the decision featured a 5–4 split on the rationale, but a 7–2 alignment on the remedy.

Although this intended “fix” enabled the CFPB to live to fight another day, the Bureau is still on the ropes because the decision simultaneously exacerbated a second constitutional defect in the agency’s design that was not before the Seila Law Court. Namely, CFPB’s funding regime cuts Congress itself out of the Bureau’s annual appropriations process. By divesting its core Article I appropriations power in this way, Congress crossed a forbidden line. Seila Law worsens this constitutional problem: by eliminating the CFPB director’s for-cause removal protections, Seila Law effectively transfers Congress’s appropriations power from an independent director to the president himself. Thus, after Seila Law, the ramifications of Congress divesting its core constitutional powers are worse than ever.

The Problem: CFPB’s Funding Structure Violates Article I Nondelegation Principles

The appropriations power is a core legislative power. Yet Title X of the Dodd-Frank Act cedes Congress’s funding authority. Upon letter-demand from the CFPB’s director, the Federal Reserve Board of Governors must transfer a portion of funds from the combined earnings of the Federal Reserve System (not to exceed 12 percent annually, plus employment cost index increases) to finance the CFPB’s operations. The precise amount transferred each year is whatever the director determines “to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year.”

Not only must the Federal Reserve surrender earnings upon the agency’s demand without any scrutiny or review by the Board of Governors, but Title X also prohibits the Appropriations Committees of the U.S. House of Representatives and the Senate from reviewing funds the CFPB draws from the Board. No other executive branch entity is permitted to set its own level of funding. This unprecedented set of delegations and abnegations creates an unchecked, self-sustaining funding island—cut off from the constitutional mainland.

This funding structure is unconstitutional. Article I’s Vesting Clause is unequivocal: “All legislative Powers herein granted shall be vested in a Congress of the United States” (emphasis added). These words mean that “Congress . . . may not transfer to another branch ‘powers which are strictly and exclusively legislative.’” What power the people have vested in the legislature through the Constitution—including the core legislative authority to appropriate the expenditures of federal agencies—Congress may not divest.1

In addition, the Constitution commands that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Congress’s responsibility to appropriate, often called “the power of the purse,” serves the “fundamental and comprehensive purpose” of “assur[ing] that public funds will be spent according to the letter of the difficult judgments reached by Congress as to the common good.” Alexander Hamilton explained that any deviation from the Article I, § 9 appropriations process is antithetical to the Constitution’s design:

The design of the Constitution in this [Appropriations Clause] provision was, as I conceive, to secure these important ends—that the purpose, the limit, and the fund of every expenditure should be ascertained by a previous law. The public security is complete in this particular, if no money can be expended, but for an object, to an extent, and out of a fund, which the laws have prescribed.2

Even the Court’s enfeebled nondelegation doctrine requires that Congress cannot delegate legislative power without articulating an “intelligible principle” that guides the executive branch’s discretion in applying the law. The CFPB believes that it meets this requirement easily.3 First, it notes, the Bureau’s funding is appropriated by law (albeit a 2010 law that operates indefinitely into the future, unlike other appropriations, which operate annually). Second, it says that the statute specifies an exact formula to determine the ceiling for CFPB funding, so it is neither vague nor indeterminate (even though it allocates monies from the Federal Reserve rather than the U.S. Treasury, unlike any other appropriation). Finally, apologists claim that courts should look more favorably on Congress when it ties its own hands than when it tries to seize executive power.  Besides, they add, Congress can always increase or decrease the CFPB’s annual funding by passing a new law.

But these arguments hardly resolve the problems with the CFPB’s financing.  Could Congress, by law, simply direct that the president may spend up to 50 percent of all Federal Reserve funds on enforcing some other set of laws?  How about 100 percent?  If so, that would turn the entire constitutional structure on its head.  Having the president direct 12 percent of those funds, as Title X now does, causes the same kind of constitutional harm. Congress may not pass a law leaving it up to federal agencies how much money they are going to spend without unlawfully divesting core legislative appropriations power.

The law’s specificity does not cure the fact that the appropriation is merely a ceiling. The Bureau may request any amount it sees fit up to a predetermined ceiling, and the Federal Reserve must turn over that requested amount without questioning it. Congress has thus surrendered its power to set the actual funding level to the CFPB itself. Given that the spending power is instrumental to Congress’s ability to rein in executive branch excesses, delegating control over funding levels is unquestionably a divestment of legislative power.

Nor can Congress necessarily change the Bureau’s funding level and thus avoid unlawfully delegating its appropriations power. If a future Congress wishes to raise or lower CFPB’s funding ceiling—or perhaps replace the ceiling with a fixed amount of annual funding—it cannot do so without the president’s signature on a new law.  And the president has very little incentive to agree to reducing his power over this stream of funding. In effect, then, by enacting the CFPB’s present funding structure, the 111th Congress tied the hands of every future Congress, subject to two-thirds majorities in both houses of some future Congress overriding a presidential veto. This is no mere “delegation” of power, a misleading term that implies the unilateral ability for Congress to reverse its grant of authority; this is an outright divestment of power.

It is worth noting that this divestment of congressional power was likely intentional. Rather than make the Bureau’s funding subject to the give and take of the annual appropriations process, like every other non-entitlement expenditure, Congress decided to put the CFPB’s funding off limits in exchange for surrendering its own future spending power. The Democrat majority in the 111th Congress was at a high-water mark of fifty-nine senators, a dominance not seen since Jimmy Carter lost re-election to Ronald Reagan (and not seen since the 111th Congress, either). A funding mechanism that indefinitely surrenders power to a complicit executive, in order to instantiate the legislative will of a transient majority in Congress—and tie the hands of future congresses—is undoubtedly clever. But it is nonetheless a bargain that the Supreme Court must unwind because it unconstitutionally divests Article I power.

If Title X of Dodd-Frank does supply an “intelligible principle” under current doctrine, then that is a powerful indictment of existing law. No proper interpretation of Article I, § 1 can permit Congress to delegate a core legislative power like the power of the purse.

How Seila Law Makes CFPB’s Nondelegation Problem Worse

If the Court was not already poised to reject the CFPB’s funding structure before, it certainly ought to be in the aftermath of Seila Law. Perhaps unwittingly, the Court’s decision has made the CFPB’s funding regime even less tenable. How? After Seila Law, the president, without input from Congress, is the final authority on the amount of the CFPB’s funding: because the president can now remove the director of the Bureau at will, the director’s preferences in this regard will only matter as much as the president allows.

Hence, by severing the director’s for-cause removal protection, the Supreme Court has put the president more or less directly in charge of over 12 percent of the funds generated by the Federal Reserve each year: more than $650 million in fiscal year 2020. Title X of Dodd-Frank unconstitutionally ceded Congress’s exclusive funding authority to the CFPB. But Seila Law has now changed the law so that it cedes core appropriations power directly to the President of the United States. It would be difficult to construct a more direct violation of the nondelegation doctrine. And remember that the law does not allow the House or Senate Appropriations Committees to review how those funds are spent. If the line-item veto was unconstitutional, then a fortiori turning over this much appropriations control to the president must be unconstitutional too.

To better understand the breathtaking scope of legislative power now ceded the president, consider the following thought experiment: Suppose President Donald Trump instructed the Bureau’s director to request only one dollar for the next quarter of its operations. Could he do that? Nothing in Title X or Seila Law appears to preclude such a move. Congress might object that that sum is less than “reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law.” But how would Congress enforce such a belief, after having ceded to the director the authority and discretion to decide how much funding to request? Thus, President Trump could cripple the entire agency by unilaterally defunding it. He could not withhold appropriated funds from any other agency due to the Impoundment Control Act. Indeed, his purported violation of that Act in (temporarily) withholding appropriated funds from Ukraine formed the basis of the first article of impeachment lodged against him.

Someone might contend that such an action would not be taking care that the laws are faithfully executed, but why not? If President Trump were to conclude that the agency’s funding structure is unconstitutional—which it surely is—then perhaps defunding the agency would be the most faithful legal action he could take. In any event, the fact that the president could effectively zero out funding for the agency (by directing that it request one dollar from the Federal Reserve) illustrates the inherent structural problem that Seila Law has created. Whether as a violation of Article I, § 1’s prohibition on divesting legislative power, or as a breach of the separation of powers, the CFPB’s funding regime violates the Constitution.

CFPB’s Unconstitutional Funding Structure Is Uniquely Egregious

As the Supreme Court emphasized in finding a separation-of-powers violation in Seila Law, “‘[p]erhaps the most telling indication of [a] severe constitutional problem’ with an executive entity ‘is [a] lack of historical precedent’ to support it.” And there is no historical precedent for the CFPB’s single-director, for-cause removal structure; nor is there any antecedent for its sui generis funding structure. Before the CFPB, Congress had never funded a presidentially controlled agency outside the appropriations process.

Title X does not fund the CFPB through the constitutionally prescribed process of congressional enactment via bicameralism and presentment. Rather, as Chief Justice Roberts notes, “the Director receives [over $650 million per year] from the Federal Reserve, which is itself funded outside of the annual appropriations process.” Thus, the president and the CFPB enjoy twolayers of financial independence, since Congress does not appropriate the Federal Reserve’s earnings, either. In Seila Law, the Court observed that“[u]nlike most other agencies, the CFPB does not rely on the annual appropriations process for funding. Instead, the CFPB receives funding directly from the Federal Reserve, which is itself funded outside the appropriations process through bank assessments.” This double layer of insulation from congressional appropriations is a unique and constitutionally suspect feature of the CFPB’s structure.

Prior to the Supreme Court’s decision in Seila Law, these dual layers of protection (constitutional or not) were at least consistent with Congress’s original conception of the CFPB as an agency independent of executive and legislative control. But in applying its severability remedy, Seila Law has made the Bureau’s director removable at will. So, in effect, Title X now provides the president himselfunfettered access to, and control over, 12 percent of annual Federal Reserve receipts: $695.9 million in fiscal year 2020. And because “the CFPB Director has the authority to bring the coercive power of the state to bear on millions of private citizens and businesses, imposing even billion-dollar penalties,” so too now does the president.

To be sure, there are other agencies over whose funding the president exerts fairly direct control, most notably the Executive Office of the President (EOP). Still, Congress funds the EOP (to the tune of about $750 million in fiscal year 2020) through the constitutionally prescribed appropriations process, and the appropriations committees on Capitol Hill oversee the EOP’s spending. The president must ask Congress for a certain level of EOP funding, and Congress chooses whether to fund it at that level. The EOP does not dictate its own level of spending.

There are also other agencies whose funding does not come directly from Congress. For example, the Federal Housing Finance Agency (FHFA) is funded through the Financial Stability Oversight Council, a division of the Treasury Department, which receives most of its funding from fees and assessments on large banks. Despite the FHFA’s similar constitutional structure, its funding mechanism differs from the CFPB in that it is self-funded through assessments levied against regulated entities, not a demand on the Federal Reserve. Moreover, unlike the CFPB, the FHFA “regulates primarily Government-sponsored enterprises, not purely private actors.”4

Likewise, the Federal Reserve itself may “levy semi-annually upon the Federal reserve banks . . . an assessment” (emphasis added). Also, the Federal Deposit Insurance Corporation (FDIC) may require that “[a]ny institution that becomes insured by the [FDIC] . . . shall pay the [FDIC] any feewhich the [FDIC] may by regulation prescribe” (emphasis added). The National Park Service “may establish, modify, charge, and collect recreation feesat Federal recreational lands and waters” (emphasis added). And the United States Postal Service may collect “all revenuesreceived by the Postal Service” (emphasis added).

But each of these examples differs from the CFPB’s case in a key respect: The fees, assessments, or investments are collected from users of governmental programs to self-fund those same programs. They are not collected to fund operations at third-party agencies without congressional oversight. Moreover, in each of these examples, the governmental entities do not have broad investigative and enforcement authority.5 The CFPB is not self-funded through the collection of “fees, assessments, or investments” from users or beneficiaries of its products or services. Rather, the CFPB makes a demand of the Federal Reserve, which the Federal Reserve cannot refuse, challenge, or modify. Moreover, unlike self-funded entities, the CFPB administers nineteenfederal statutes, including a statutory prohibition against “any unfair, deceptive, or abusive act or practice” in the area of consumer finance. To accomplish this wide-ranging mandate, the CFPB may promulgate binding regulations. The Seila Law Court noted that Congress also vested the CFPB with potentenforcement powers. The agency has the authority to conduct investigations, issue subpoenas and civil investigative demands, initiate administrative adjudications, and prosecute civil actions in federal court. To remedy violations of federal consumer financial law, the CFPB may seek restitution, disgorgement, and injunctive relief, as well as civil penalties of up to $1,000,000 (inflation adjustedfor each day that a violation occurs.

The CFPB’s rulemaking and enforcement powers are coupled with extensive adjudicatory authority. The agency may conduct administrative proceedings to “ensure or enforce compliance with” the statutes and regulations it administers. When the CFPB acts as an adjudicator, it has “jurisdiction to grant any appropriate legal or equitable relief.” The “hearing officer” who presides over the proceedings may issue subpoenas, order depositions, and resolve any motions filed by the parties. No other government agency has this much power to regulate, investigate, adjudicate, and punish, while simultaneously enjoying the authority to fund itself without consulting the people’s representatives.

To the extent Chief Justice Roberts’s opinion in Seila Law exhibited any concern with the CFPB’s funding structure, it was with the statute’s attempt to excessively constrain presidential power: “The CFPB’s receipt of funds outside the appropriations process further aggravates the agency’s threat to Presidential control. The President normally has the opportunity to recommend or veto spending bills that affect the operation of administrative agencies.” But it is hardly a solution to the nondelegation problem to switch from cutting the president out of the loop to putting him entirely in charge of the Bureau’s appropriations. By altering Title X of Dodd-Frank to cure the CFPB’s separation-of-powers problem, the Supreme Court jumped out of an unconstitutional Article II frying pan right into an unconstitutional Article I fire.

Where Will the Court Go from Here?

It is only a matter of time before the Supreme Court reviews a direct constitutional challenge to the CFPB’s funding structure. When it does, the Court will have to consider its options carefully. Unlike in Seila Law, severability will not be the remedial path of least resistance. It is not obvious what could be severed to fix the nondelegation problem. If the Court were to sever the funding stream from the Federal Reserve, for example, it would disable the agency. The Court cannot very well order Congress to fund the Bureau from another source or to fund it through normal appropriations or even to rewrite the funding provisions of the Dodd-Frank statute. It could strike down the current method of funding as unconstitutional but stay the mandate to give Congress time to address the issue. Or, it could strike down Title X in its entirety, though this Court is unlikely to take a step that bold.

Another alternative would be to adopt something along the lines of the proposal advanced by Justices Thomas and Gorsuch in the Seila Law case. That is, the Court could refuse to enforce whatever order has been appealed to the Supreme Court and signal that so long as the CFPB’s unconstitutional funding structure remains intact the Bureau can expect to find all of its similar orders unenforceable whenever a constitutional objection is raised. That remedy would throw the solution back to Congress too, but it would be more of a slow burn that counts on the measured pace of litigation to create space for reform.

A third option, which seems less plausible on its face but resembles the ersatz solution the Supreme Court contrived in Gundy v. United States, would construe the statutory ceiling put in place by Congress as the mandatory amount of appropriation for the Bureau each year. By removing the CFPB’s ostensible control over the amount of funding it receives, this solution would address the “leaving the amount up to the president” nondelegation problem. But it would still leave the president in control of significant funding without congressional oversight. Conversely, as the chief justice pointed out, it would also deny the president his constitutionally assigned opportunity to veto the annual appropriation. Also, Congress did not set the ceiling as the appropriations amount. It clearly conferred discretion. The Court does not have any more power to set an alternative appropriations level that Congress did not in fact establish than the CFPB or the president does.

Whatever course the Court follows, it need not worry that striking down the CFPB’s funding structure will portend dramatic change for how other agencies are funded. The CFPB’s structure is unique and easily distinguished by the dual layers of insulation from the appropriations process.

Whether the Federal Reserve or other rare agencies funded outside the appropriations process are constitutional can be saved for another time. Here, Congress innovated further and came up with a funding mechanism twice removed from the congressional appropriations process. Surely that degree of insulation from the appropriations process violates the separation of powers, the nondelegation doctrine, or both—whether or not an agency once removed from the appropriations process (like the Federal Reserve) does so. Even where the Supreme Court has permitted some divergence from the constitutional scheme for structuring federal agencies, it has invalidated those that provide a double layer of removal from constitutional strictures.


Seila Law fixed the removal problem with the CFPB’s director, but the Court’s “fix” may have sealed the agency’s fate. While repairing the CFPB’s infringement upon the president’s Article II powers, converting the director into an at-will principal officer worsens the constitutional defects of the Bureau’s financing regime.

Post-Seila Law, the CFPB’s unchecked authority not only conflicts with the congressional statutory design and purpose but is inconsistent with the Constitution’s design and purpose.  The Founders vested Congress with control over spending and lawmaking.6 Because Article I, § 1 vests all legislative power in Congress, Congress may not subdelegate any of that power to the CFPB. But the portions of Title X that survived the Supreme Court’s blue-penciling in Seila Law permit the president to determine the CFPB’s funding and budget, to direct the agency’s “authority to promulgate binding rules fleshing out 19 federal statutes,” and to wield the CFPB’s “potent enforcement powers.” Unconstrained by constitutional checks and balances, these powers consolidated in the executive branch can now be used by the current president and his successors—for good or for ill.

Even before the Seila Law decision, serious doubts existed about the constitutionality of the Bureau’s funding mechanism because “[t]he nondelegation doctrine bars Congress from transferring its legislative power to another branch of Government.” The power of the purse is a core legislative power.  And in Title X of Dodd-Frank, Congress traded away that power to move the Bureau’s funding beyond future congressional—and, it thought, future presidential—control. This, Congress may not do. 

Indeed, Congress may finally have devised a delegation of power that is so complete and so extraordinary that the Supreme Court will be forced to confront and unwind it. It may even be forced to reinvigorate the nondelegation doctrine—and abandon the intelligible principle fiction—to do so. Because the Bureau’s funding regime is unprecedented, the Court will not have to worry about disturbing other agencies that have longstanding historical pedigrees. But Seila Law has left the Court no choice but to take another critical look at the CFPB’s unique constitutional defects. Having rescued the Bureau from the separation-of-powers frying pan, the Court has dropped it into a nondelegation fire that is anathema to the constitutional order of government.  Unless the Court takes up its unfinished business soon to resolve this untenable situation, this agency will “slip from” the legislature’s “control, and thus from that of the people.”7

  • 1See Loving v. United States517 U.S. 748, 758 (1996) (“The fundamental precept of the delegation doctrine is that the lawmaking function belongs to Congress, U.S. Const., Art. I, § 1, and may not be conveyed to another branch or entity.”).
  • 2Alexander Hamilton, Explanation (Nov. 11, 1795) in The Works of Alexander Hamilton, Vol. VII, (John C. Hamilton ed., S.D.N.Y. Clerk 1851) (emphasis in original).
  • 3Reply Brief for Petitioner at 4 n.2, CFPB v. Law Offices of Crystal Moroney, P.C. (No. 7:20-cv-03240) (S.D.N.Y. July 29, 2020).
  • 4Even so, the Supreme Court will hear arguments this coming term regarding whether FHFA’s single-director structure violates the separation of powers.  Collins v. Mnuchin, No. 19-422 (cert. granted July 9, 2020).
  • 5See Seila Law (distinguishing four “isolated examples” that “d[id] not involve regulatory or enforcement authority remotely comparable to that exercised by the CFPB.”).
  • 6Seila Law (recognizing that “[t]he Director does not even depend on Congress for annual appropriations” and warning that “the ‘power over the purse’ [i]s the ‘most compleat [sic] and effectual weapon’ in representing the interests of the people.”) (quoting The Federalist No. 58, at 394 (J. Madison)).
  • 7Seila Law (quoting Free Enterprise Fund).