Amicus Curiae Brief — Consumer Financial Protection Bureau, et al., Petitioners v. Community Financial Services Association of America, Limited, et al.

No. 22-448

IN THE

Supreme Court of the United States

____________

CONSUMER FINANCIAL PROTECTION BUREAU, ET AL.,

Petitioners,

v.

COMMUNITY FINANCIAL SERVICES ASSOCIATION

OF AMERICA, LIMITED, ET AL.,

Respondents.

____________

On Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit

____________

BRIEF OF WASHINGTON LEGAL FOUNDATION AS

AMICUS CURIAE SUPPORTING RESPONDENTS

____________

John M. Masslon II

Counsel of Record

Cory L. Andrews

WASHINGTON LEGAL FOUNDATION

2009 Massachusetts Ave. NW

Washington, DC 20036

(202) 588-0302

jmasslon@wlf.org

July 10, 2023

QUESTION PRESENTED

Whether an executive agency may authorize its

own funding each year without an appropriation from

Congress.

iii

TABLE OF CONTENTS

Page

QUESTION PRESENTED ......................................... i

TABLE OF AUTHORITIES ..................................... iv

INTEREST OF AMICUS CURIAE ............................1

INTRODUCTION .......................................................1

STATEMENT ..............................................................3

I.

STATUTORY BACKGROUND......................................3

II. FACTUAL BACKGROUND AND PROCEDURAL

HISTORY .................................................................4

SUMMARY OF ARGUMENT.....................................5

ARGUMENT ...............................................................7

I.

THE CFPB’S FUNDING MECHANISM LACKS

ANY HISTORICAL PRECEDENT ................................7

A. Agencies That Provide Services And

Spend No More Than The Amount

Of Fees They Collect Are Dissimilar

To The CFPB ..............................................8

B. Social Welfare Programs Are

Dissimilar To The CFPB .........................16

C. Other Founding-Era Statutes Do

Not Support Reversal ..............................18

II. THE JUDICIARY MUST ENFORCE CHECKS

AND BALANCES BETWEEN THE OTHER

BRANCHES ............................................................20

CONCLUSION ..........................................................23

iv

TABLE OF AUTHORITIES

Page(s)

Cases

Axon Enter., Inc. v. FTC,

598 U.S. 175 (2023) ................................................1

Clinton v. City of New York,

524 U.S. 417 (1998) ................................................2

INS v. Chadha,

462 U.S. 919 (1983) ........................................21, 22

Lucia v. SEC,

138 S. Ct. 2044 (2018)............................................1

Marbury v. Madison,

5 U.S. 137 (1803)..................................................22

NLRB v. Noel Canning,

573 U.S. 513 (2014) ................................................7

Seila Law LLC v. CFPB,

140 S. Ct. 2183 (2020)........................................4, 7

United States v. Winchester,

335 F.R.D. 82 (M.D.N.C. 2020) .........................3, 4

Walker v. Ham,

2 N.H. 238 (1820) .................................................12

Zivotofsky ex rel. Zivotofsky v. Kerry,

566 U.S. 189 (2015) ..............................................22

Statutes

8 U.S.C.

§ 1254(c)(1) (1982) ................................................21

§ 1254(c)(2) (1982) ................................................21

v

TABLE OF AUTHORITIES

(continued)

Page(s)

12 U.S.C.

§ 5481(12) ...............................................................4

§ 5481(14) ...............................................................4

§ 5491(a) .................................................................4

§ 5497(a)(1).............................................................4

§ 5497(a)(2)(A) ........................................................4

§ 5512(a) .................................................................4

§ 5512(b)(1).............................................................4

Act of Apr. 2, 1792, ch. 1, 1 Stat. 246 .......................14

Act of Aug. 4, 1790, ch. 35, 1 Stat. 145 .......................9

Act of Aug. 10, 1846,

ch. 178, 9 Stat. 102 ..............................................19

Act of Aug. 12, 1790, ch. 47, 1 Stat. 186 ...................20

Act of Feb. 9, 1847, ch. 7, 9 Stat. 123 .......................19

Act of Feb. 19, 1875, ch. 89, 18 Stat. 329 .................15

Act of Feb. 20, 1792, ch. 7, 1 Stat. 232 .....................10

Act of Feb. 28, 1799, ch. 19, 1 Stat. 624 ...................17

Act of Feb. 28, 1871,

ch. 100, 16 Stat. 440 ............................................15

Act of July 4, 1836, ch. 357, 5 Stat. 117 ...................15

Act of July 16, 1798, ch. 77, 1 Stat. 605 ...................16

Act of July 31, 1789, ch. 5, 1 Stat. 29 .........................9

Act of June 26, 1812,

ch. 107, 2 Stat. 759 ..............................................17

Act of Mar. 3, 1791, ch. 15, 1 Stat. 199 ......................9

Act of May 8, 1792, ch. 36, 1 Stat. 275 .....................17

vi

TABLE OF AUTHORITIES

(continued)

Page(s)

Regulations

9 C.F.R. § 3.6(c)(2) .......................................................2

12 C.F.R.

§ 1041.8(b)(1)..........................................................5

§ 1041.8(c)(1) ..........................................................5

Payday, Vehicle Title, and Certain

High-Cost Installment Loans,

82 Fed. Reg. 54,472 (Nov. 17, 2017) ..................4, 5

Payday, Vehicle Title, and Certain

High-Cost Installment Loans;

Ratification of Payment Provisions,

85 Fed. Reg. 41,905 (July 13, 2020) ......................5

Other Authorities

2 The Reports of the Commissioners

Appointed to Examine, Take, and

State the Public Accounts of the

Kingdom (H.M. Printers, 1787)...........................12

Christine Kexel Chabot, The Founders’

Purse (June 20, 2023) ..........................................19

David Shepardson, U.S. Postal Service

reports $4.9 billion 2021 net loss,

Reuters (Nov. 11, 2021) .......................................10

Newton D. Mereness, Maryland as a

Proprietary Province (1901) .................................12

Nick Parrillo, Against the Profit Motive:

The Salary Revolution in American

Government, 1780-1940 (2013) ................ 11, 12, 13

vii

TABLE OF AUTHORITIES

(continued)

Page(s)

Rachel E. Barkow, Insulating Agencies:

Avoiding Capture Through

Institutional Design,

89 Tex. L. Rev. 15 (2010) .....................................14

Richard H. Steckel, A History of the

Standard of Living in the United

States, Econ. Hist. Assoc.

(July 12, 2002)........................................................3

William Hawkins, 1 A Treatise of the

Pleas of the Crown (1716) ....................................13

Zachary S. Price, Enforcement

Discretion and Executive Duty,

67 Vand. L. Rev. 671 (2014) ................................10

1

INTEREST OF AMICUS CURIAE*

Washington Legal Foundation is a nonprofit,

public-interest law firm and policy center with

supporters nationwide. WLF promotes free

enterprise, individual rights, limited government,

and the rule of law. It often appears as amicus

opposing the accumulation of power in any one

governmental

branch,

which

violates

the

Constitution’s careful separation of powers. See, e.g.,

Axon Enter., Inc. v. FTC, 598 U.S. 175 (2023); Lucia

v. SEC, 138 S. Ct. 2044 (2018).

INTRODUCTION

The top-side briefs reveal the shotgun

approach of the Consumer Financial Protection

Bureau and its friends in defending the

constitutionality of the CFPB’s funding mechanism.

Some briefs, including one by the Constitutional

Accountability Center on behalf of several professors,

depict the CFPB’s funding mechanism as adhering to

historical practice. Other briefs try to scare this Court

by arguing that if the Court strikes down the CFPB’s

funding mechanism then bad actors will run amok

throughout the country.

On the surface, these arguments appear

unrelated. But they are interrelated. If the historical

arguments fall, then the doomsday arguments must

fall too. In 1776, the thirteen original colonies

declared their independence from Great Britian

because King George III had too much power and

* No person or entity, other than Washington Legal

Foundation and its counsel, paid for the brief’s preparation or

submission.

2

Parliament had too little power. At the Constitutional

Convention, the Framers remained keenly aware of

the executive branch’s threat to liberty when it has

too much power. They included many structural

checks to prevent the President from having too much

power. “So convinced were the Framers that liberty of

the person inheres in structure that at first they did

not consider a Bill of Rights necessary.” Clinton v.

City of New York, 524 U.S. 417, 450 (1998) (Kennedy,

J., concurring).

Congressmen in the early days of the Republic

likewise ensured that Congress did not give the

executive branch too much power. That is why the

administrative state as we know it today did not exist

in the late 1700s and early 1800s. Rather than punt

to unelected bureaucrats, Congress passed laws that

set policy for our nation.

This worked. The federal government

functioned just fine without a massive administrative

bureaucracy and without independent federal

agencies lacking any accountability to the political

branches. Many tasks the federal government now

handles were governed by state and local officials.

These politicians were closer to the people and thus

better understood their wants and needs.

The federal government was not in charge of

every aspect of Americans’ lives. For example, the

government trusted people to know which dogs could

be housed together. Now, however, a federal agency

decrees which dogs may be kept together and which

must be in different pens. See 9 C.F.R. § 3.6(c)(2).

3

Yet no crisis arose from this lack of federal

regulations. Our nation grew from a collection of

States indebted to our European allies into the

world’s largest and strongest economy. Despite what

some top-side amici argue, the period before the

growth of the administrative state saw great strides

in standards of living for most Americans. See

Richard H. Steckel, A History of the Standard of

Living in the United States, Econ. Hist. Assoc. (July

12,

2002),

https://tinyurl.com/mwdx489k

(life

expectancy grew the most between 1880 and 1890). In

short, Americans thrived before the rise of

independent regulatory agencies and before Congress

created the CFPB.

So if the CFPB’s historical arguments are

wrong, then the sky-is-falling argument must also

fail. There is no harm in returning to a governmental

structure that requires political accountability.

Requiring federal agencies to justify their

appropriations yearly just means a return to the past.

And on that score, the past was not so bad. Thus, the

top-side briefs get it all wrong. History shows that the

CFPB’s funding mechanism is not only novel but also

unconstitutional. Thus, this Court should affirm the

Fifth Circuit’s ruling and make the CFPB accountable

to Congress.

STATEMENT

I.

STATUTORY BACKGROUND

“In the midst of the Great Recession, (soon-tobe White House Chief of Staff) Rahm Emanuel”

quipped that politicians should “[n]ever let a serious

crisis go to waste.” United States v. Winchester, 335

4

F.R.D. 82, 94 (M.D.N.C. 2020) (cleaned up). So after

the 2008 financial crisis, Congress created the CFPB.

The independent agency is part of the Federal

Reserve System. 12 U.S.C. § 5491(a). The CFPB has

administrative and enforcement authority over

eighteen federal statutes which, before 2010, were

enforced by seven agencies. See id. §§ 5512(a),

5481(12), (14). These statutes “cover everything from

credit cards and car payments to mortgages and

student loans.” Seila Law LLC v. CFPB, 140 S. Ct.

2183, 2200 (2020). The CFPB’s director may

“prescribe rules and issue orders and guidance, as

may be necessary or appropriate to enable the CFPB

to administer and carry out the purposes and

objectives of the Federal consumer financial laws, and

to prevent evasions thereof.” 12 U.S.C. § 5512(b)(1).

The CFPB does not receive periodic

congressional appropriations. Rather, it “receives

funding directly from the Federal Reserve, which is

itself funded outside the appropriations process

through bank assessments.” Seila Law, 140 S. Ct. at

2194. Annually, the CFPB’s director decides what is

“reasonably necessary to carry out the” agency’s

functions. 12 U.S.C. § 5497(a)(1). The Federal Reserve

must then give the CFPB that requested amount if it

is less than a fixed percentage of the Federal

Reserve’s

“total

operating

expenses.”

Id.

§ 5497(a)(2)(A).

II.

FACTUAL BACKGROUND

HISTORY

AND

PROCEDURAL

The CFPB director issued a final rule

regulating payday, vehicle title, and certain high-cost

installment loans. Payday, Vehicle Title, and Certain

5

High-Cost Installment Loans, 82 Fed. Reg. 54,472

(Nov. 17, 2017). The rule bars lenders from using

preauthorized account access to receive payment after

two successive withdrawal attempts fail for

insufficient funds. 12 C.F.R. §§ 1041.8(b)(1), (c)(1).

In April 2018, the Community Financial

Services Association challenged the rule. Among

several challenges, the CFSA alleged that the CFPB’s

self-funding mechanism violated the Constitution’s

separation of powers. After Seila Law declared the

CFPB’s structure unconstitutional, the CFPB’s

director purported to ratify the rule. Payday, Vehicle

Title, and Certain High-Cost Installment Loans;

Ratification of Payment Provisions, 85 Fed. Reg.

41,905 (July 13, 2020). In a single paragraph, the

District Court declared the CFPB’s self-funding

mechanism constitutional. Pet. App. 72a. The Fifth

Circuit reversed. Pet. App. 33a-42a. This Court then

granted certiorari to decide whether the CFPB’s

funding mechanism is constitutional.

SUMMARY OF ARGUMENT

I.A. Founding-era statutes that provided

funding for agencies through fees and bounties do not

support reversing the Fifth Circuit’s decision. The

CFPB’s funding mechanism differs from those feebased

systems.

Unlike

fee-based

funding

mechanisms, which encourage accountability to the

public, the CFPB’s funding scheme discourages

accountability. Rather than having to answer to the

people’s representatives—and thus the people—

unelected bureaucrats can operate without any

political checks. They can bankroll their own

regulatory enforcement agenda and implement it

6

without meaningful oversight. This has happened

throughout the CFPB’s short existence.

B. Nor do social welfare programs support the

CFPB’s arguments. The programs the founding

generation enacted were all fully funded through

taxes, bounties, or other fee-based systems. There

was no blank check for unelected bureaucrats to write

for themselves. Congress authorized various agencies

to spend the fees and bounties they collected to

provide a safety net for those at risk. So reliance on

these programs by the CFPB and its amici is

misplaced.

C. Finally, other statutes do not support the

CFPB’s argument. Those statutes authorized

expending a specific sum of money. In one instance

that was a fraction of a bequest. Two other cases

involved debt that Congress authorized through prior

enactments. Thus, no precedent supports the CFPB’s

argument that its funding mechanism satisfies the

Appropriations Clause.

II. The CFPB’s supporters argue that affirming

the Fifth Circuit decision would violate separation-ofpowers principles by “second-guessing” Congress.

This argument lacks merit. The Constitution’s careful

separation of powers allows the judicial branch to

decide disputes about the constitutionality of

statutes. Barring review simply because Congress

passed a statute would remove any barrier to

Congress’s establishing a national religion or

allowing the FBI to search residences without a

warrant. The absurdity of such a rule is obvious.

7

ARGUMENT

I.

THE CFPB’S FUNDING MECHANISM LACKS

ANY HISTORICAL PRECEDENT.

Professors represented by the Constitutional

Accountability Center argue that the CFPB’s funding

mechanism has many historical analogs. A careful

review of the cited statutes, however, reveals that the

CFPB’s funding method is novel. Every cited statute

falls into one of three categories. Yet the CFPB falls

into none of those categories for both practical and

legal reasons.

These differences matter. This Court has

looked to historical practice when deciding what the

Constitution’s structural protections require. For

example, the key to the Court’s Seila Law decision

was that the CFPB’s structure was “novel.” 140 S. Ct.

at 2192. True, the Court had previously blessed forcause removal protections for some federal officers.

But in Seila Law this Court emphasized the context

of those historical protections versus the context of

the CFPB’s director’s protection. Because the contexts

differed, the Court held that the structure was

unconstitutional. It is hard to imagine that Congress

discovered a constitutional agency structure that was

unknown for 220 years.

Seila Law was not the only time the Court

examined historical practice when scrutinizing

structural constitutional protections. In NLRB v. Noel

Canning, the Court reviewed historical precedent to

determine the contours of the Appointments Clause.

See 573 U.S. 513, 528-29 (2014). There too, the Court

found “context” important. Id. at 537.

8

This Court’s focus on history is why the CFPB

devotes so much of its merits brief—as do its amici—

to arguing for some historical precedent for its

funding mechanism. If the contexts are dissimilar,

the examples cannot be used as historical precedent

supporting the CFPB’s argument. So if this Court

agrees that the context of the examples the CFPB and

its amici cite differ from the context of the CFPB’s

funding mechanism, it should affirm the Fifth

Circuit’s decision declaring that funding mechanism

violates the Appropriations Clause.

A.

Agencies That Provide Services And

Spend No More Than The Amount

Of Fees They Collect Are Dissimilar

To The CFPB.

The first set of statutes that the professors cite

all arose in a context far different from the aftermath

of the 2008 financial crisis. All the cited examples deal

with agencies’ expenditure of fees that they collected.

When Congress created the CFPB, it did not envision

a revenue-neutral agency that spent fees it collected.

This contextual difference means the Court can easily

distinguish the cited statutes.

1. The professors cite the Customs Service as

an example of Congress’s “authoriz[ing] self-funding

and indefinite appropriations since the founding.”

Professors’ Br. 23 (capitalization altered). But the

Customs Service was just one of the first agencies that

Congress authorized to collect fees and duties. These

agencies then used the fees and duties they collected

to fund their operations and returned the remainder

to the treasury.

9

Congress created the Customs Service soon

after it first convened in New York City. See Act of

July 31, 1789, ch. 5, 1 Stat. 29. The statute provided,

in excruciating detail, how the Customs Service was

to be run. Some ports of entry were staffed with “a

collector, naval officer and surveyor.” Id. § 1, 1 Stat.

at 30. Other ports received a “collector and surveyor.”

Id. And still others received only a “collector.” Id.

Congress also detailed how the Customs

Service’s employees were compensated. Act of July 31,

1789, §§ 29, 30, 1 Stat. at 44-45. They got a fixed sum

for some actions and received a percentage of the fees

collected for others. See id. § 29, 1 Stat. at 44-45.

Besides detailing compensation, Congress also

ensured that Customs Service employees were

overseen by officers who received annual

appropriations from Congress. Customs officers had

to keep records of their transactions as directed by

“the proper department or officer having the

superintendence of the collection of the revenue” and

to “submit their books, papers, and accounts to the

inspection of such persons as may be appointed for

that purpose.” Act of Aug. 4, 1790, ch. 35, § 6, 1 Stat.

145, 155. There are no similar checks on the CFPB.

The same holds true for revenue officers. Some

of these positions were created at the end of the First

Congress. Act of Mar. 3, 1791, ch. 15, § 4, 1 Stat. 199,

200. Like customs agents, the revenue officers just

received a portion—up to seven percent—of what they

collected. See id. § 58, 1 Stat. at 213. Besides those

collections, the revenue officers kept some proceeds of

the penalties they collected. See id. § 44, 1 Stat. at

209.

10

Again, this does not resemble the CFPB’s

funding mechanism. The CFPB does not earn revenue

for the United States. Its budget far outpaces any

money that it collects. This contrasts sharply with

revenue officers, who collected over 13 times their

salaries and expenses.

The executive branch quickly recognized its

supervisory authority over customs agents and

revenue officers. The first Treasury Secretary,

Alexander Hamilton, “claimed authority as Secretary

to make binding legal determinations for executive

officials regarding interpretation of customs and

revenue laws,” and “engaged in extensive

correspondence with customs collectors and revenue

officers regarding the proper performance of their

duties.” Zachary S. Price, Enforcement Discretion and

Executive Duty, 67 Vand. L. Rev. 671, 734 n.271

(2014) (citations omitted). Again, there is no such

executive oversight of the CFPB.

The last agency on which the professors

elaborate is the Post Office. Like customs agents and

revenue officers, postal officials were paid from their

receipts. See Act of Feb. 20, 1792, ch. 7, §§ 3, 8, 1 Stat.

232, 234-35.

Today, we think of the United States Postal

Service as a money-losing prospect. And it is. See

David Shepardson, U.S. Postal Service reports $4.9

billion 2021 net loss, Reuters (Nov. 11, 2021),

https://tinyurl.com/4t4xuhrt. But that is because

Congress refuses to allow the USPS to operate based

on market principles. It also stems from USPS union

contracts that ignore market forces. At the time of its

founding, however, the Post Office made ample

11

revenue for the country. And like the other revenuepositive agencies, Congress allowed it to pay its

employees with those funds.

The professors spill substantial ink on these

three examples. But all three are inapt. Each example

is of an agency collecting money and then keeping

some for its expenses and remitting the rest to the

treasury. Here, the CFPB is not in the black. So the

main examples that the professors cite support the

CFSA’s argument that the CFPB’s funding

mechanism lacks any historical basis.

2. “In America today, the lawful income of a

public official consists of a salary. However, in the

eighteenth century and often far into the nineteenth

and early twentieth centuries, American law

authorized a wider variety of ways for officials to

make money.” Nick Parrillo, Against the Profit

Motive: The Salary Revolution in American

Government, 1780-1940, 1 (2013). Before the change

to salary-based compensation, “[t]here were two

basic” ways that federal officers made money—

“facilitative payments and bounties.” Id. at 2.

Facilitative payments were fees that companies or

individuals paid for a license or some other service.

See id. Bounties were fees that officials received for

seizing another’s person or property. See id.

Facilitative payments had a long history.

Parliament passed statutes authorizing facilitative

fees “to cover certain offices in England.” Parrillo at

65. The same year the U.S. Constitution was written,

a British parliamentary commission observed that

the practice brought governmental officials and the

public “into a mutual relation[ship],” which

12

encouraged “habits of pecuniary obligation or

exchange of private interest.” 2 The Reports of the

Commissioners Appointed to Examine, Take, and

State the Public Accounts of the Kingdom 187 (H.M.

Printers, 1787).

“[N]early

all

the

American

colonial

legislatures” followed this example and used

facilitative payments “to cover many and sometimes

all of the offices within their respective bounds.”

Parrillo at 65. The Maryland legislature thought that

governmental officials “would not perform their

duties with as much diligence when paid a fixed

salary as when paid for each particular service.”

Newton D. Mereness, Maryland as a Proprietary

Province 387 (1901). Facilitative payments were,

however, most often used when the services provided

“were common, well known, of an uniform value, and

whose nature was such that a fair price could be put

upon them before they were performed.” Walker v.

Ham, 2 N.H. 238, 239 (1820).

Officers who received facilitative payments

“viewed service recipients as ‘customers’ to be

attracted, and service recipients viewed officers as

vendors offering valuable benefits to be purchased.”

Parrillo at 2. This led to better customer service. If a

government official did not provide quality services

promptly, the customer would likely go to a different

governmental official the next time he had a need. Or

he may just break the law and not pay the fee. In

other words, the fee-based system incentivized

government employees and officers to treat the public

as their customers.

13

The shift from good customer service to bad

customer service was slow. Even when facilitative

payments became highly regulated, “[c]ustomer

service lived on. This was partly because officers and

service recipients continued to reach individualized

bargains over the prices of services (albeit illegally).”

Parrillo at 125. But “even in cases where officers and

service recipients conformed to uniform statutory

prices, fees still caused officers to view recipients as a

class as their ‘customer base.’ They continued to cater

to the wishes of that base, for they wanted to

encourage its members to keep showing up and

requesting services.” Id.

Things went downhill after the facilitative

payments ended. Between “1870-1920, lawmakers

concluded that fee-based compensation of officers,

even when regulated by statute, led unavoidably to

‘corrupt’ fee-taking outside the statute. To stop

officers from taking unlawful fees, one had to prohibit

them from taking any fees and give them salaries

instead.” Parrillo at 111.

Anyone who has had the pleasure of going to

the local department of motor vehicles knows that

government employees no longer see citizens as

customers to please. Rather, they are seen as an

inconvenience that must be dealt with to collect a

salary at the end of every two-week period. This is the

opposite of what happened during our founding era

when employees’ and officers’ livelihoods depended on

providing good customer service. Cf. William

Hawkins, 1 A Treatise of the Pleas of the Crown 171

(1716) (unreasonable to expect “officers who depend

upon a known fixed salary” to “be so ready in

14

undertaking, or diligent in executing” their jobs as

officers who receive facilitative payments).

The CFPB, of course, does not provide services

to regulated parties in return for fees that fund its

operations. Rather, it gets to write itself a blank check

each year to fund operations. It then promulgates

regulations that are bad for the pocketbooks of both

businesses and consumers.

Because “the CFPB’s jurisdiction is not

optional,” it “need not make any effort to attract feepaying entities.” Rachel E. Barkow, Insulating

Agencies: Avoiding Capture Through Institutional

Design, 89 Tex. L. Rev. 15, 77 (2010). The only people

to benefit are the unelected bureaucrats seated in the

CFPB’s headquarters. This helps explain why all the

fee-based statutes cited in the top-side briefs do not

support the CFPB’s argument about how its funding

mechanism fits with founding-era precedent.

3. The professors also string cite other statutes

that supposedly support their position. But again,

those statutes merely allowed agencies to pay for

their operations through the collection of fees, which

bears no resemblance to the CFPB’s funding. The first

mint was established during the Second Congress.

See Act of Apr. 2, 1792, ch. 1, 1 Stat. 246. Unlike

today’s mint, at the founding any citizen could bring

gold and silver and request that it be made into coins.

Id. § 14, 1 Stat. at 249. The mint, however, charged a

0.5% fee for this service. See id. This fee then helped

fund the mint’s operations. In other words, the

funding structure did not resemble the CFPB’s

funding mechanism.

15

Having fees fund public programs was common

early in our nation’s history. When Congress

established a permanent patent office, it established

a fee schedule under which U.S. citizens paid $30,

British citizens paid $500, and other foreign citizens

paid $300 to submit a patent application. See Act of

July 4, 1836, ch. 357, § 9, 5 Stat. 117, 121. These fees

“constituted a fund” to pay the Patent Office

employees “and [cover] all other expenses of the

Patent Office.” Id. Again, this was not an open check

for the Patent Office to spend whatever it pleased

without Congressional authorization. Rather, it was a

way for the Patent Office to fund its operations in a

manner Congress controlled.

The practice of having agencies funded through

fees continued after the Civil War. In 1871, Congress

passed a statute aimed at increasing the safety of

steamboats that carried passengers or freight in the

waters of the United States. See generally Act of Feb.

28, 1871, ch. 100, 16 Stat. 440. Of course, this entailed

having government inspectors and other officials run

the safety program. Funding for the entire Steamboat

Inspection Service came from “the revenues received

into the treasury from the inspection of steam-vessels,

and the licensing of the officers of such vessels.” Id.

§ 66, 16 Stat. at 458.

Finally, in 1875 Congress changed how bank

examiners were paid. Rather than receive a salary or

mileage, bank examiners received a flat fee “assessed

by the Comptroller of the Currency upon, and paid by,

the” bank being examined. Act of Feb. 19, 1875, ch.

89, 18 Stat. 329, 329. In other words, there was no

federal expenditure of tax revenue. The banks paid

the examiners a fee for their service depending on the

16

size of the bank. Again, this does not remotely

resemble the CFPB’s funding mechanism.

B.

Social Welfare Programs

Dissimilar To The CFPB.

Are

The next set of statutes cited to support the

CFPB’s argument fares no better. All those laws arose

in the social welfare context. The CFPB is not a social

welfare agency. So these laws also arose in a context

dissimilar to the CFPB.

In 1798, Congress passed a workers’

compensation program for seamen. Act of July 16,

1798, ch. 77, § 2, 1 Stat. 605, 606. The program’s

funding came from taxing seamen’s wages twenty

cents per month. See id. § 1, 1 Stat. at 605-06. These

funds were withheld from the seamen’s paychecks,

just as workers’ compensation funds are withheld

from many employees’ paychecks today.

No outside funds went to caring for the

sickened seamen. The federal officials responsible for

the care did not receive a salary; they were entitled to

only recovery of expenses. Act of July 16, 1798, § 4, 1

Stat. at 606. Any excess funds collected from the tax

on seamen’s salaries were used to build hospitals to

provide better care of the seamen. In other words,

every penny collected from the tax was expended on

the care of seamen. No outside money was deposited

in the United States treasury and no money was

expended from the treasury’s general fund.

This differs significantly from the CFPB’s

funding scheme. The whole point of the seamen’s

program was to be net revenue neutral. Again, all

17

funds received were to be spent on caring for sick

seamen, and no other government funds were to be

used for that purpose. As shown by this 1798 statute,

these types of social welfare programs have a long

history in America. Congress has recognized the need

for a social safety net for some people for over 225

years.

The professors next rely on a wartime statute

that authorized private parties to capture vessels

helping Great Britain during the War of 1812. Under

the statute, when a private party captured a vessel,

he had to hand over two percent of the net proceeds to

the government. See Act of June 26, 1812, ch. 107,

§ 17, 2 Stat. 759, 763. This money was used “as a fund

for the support and maintenance of the widows and

orphans of such persons as [were] slain; and for the

support and maintenance of such persons as [were]

wounded and disabled on board of the private armed

vessels of the United States, in any engagement with

the enemy.” Id., 2 Stat. at 764.

Like the fund for injured seamen that the First

Congress exacted, this wartime statute provided

funding for those injured or killed while capturing

enemy vessels. There was no outside appropriation of

funds. Rather, it was funded through a tax on

captured goods and vessels.

The wartime statute also shows how bounty

statutes generally operated. They prescribed fixed

bounties or formulas. See, e.g., Act of May 8, 1792, ch.

36, § 3, 1 Stat. 275, 276-77; Act of Feb. 28, 1799, ch.

19, § 4, 1 Stat. 624, 625-26. For example, Congress

limited the bounties for each prosecution. U.S.

attorneys’ earnings were, therefore, a function of how

18

much work they did. In contrast, the CFPB has nearly

unbounded discretion to decide what it wants to do

and how much money it spends.

These safety-net programs did not have a blank

check for unaccountable bureaucrats to decide how

much of the general treasury’s funds to spend.

Rather, Congress established a detailed scheme

where the needy would receive assistance from the

government in a manner that did not cost the

government money. Such programs cannot be used to

support the CFPB’s funding mechanism.

The CFPB does not provide a safety net.

Rather, it does the opposite. It hurts the most

vulnerable among us by causing the prices for

necessary goods and services to rise due to wasteful

regulations. This contrasts with the programs the

professors cite in support of the CFPB.

C.

Other Founding-Era Statutes Do

Not Support Reversal.

The final group of cited statutes also arose in

contexts dissimilar to the CFPB—bequests and the

national debt. Bequests are different because they

involve gifts to the United States. The national debt

is a unique issue, and it is hard to believe that a law

allowing for spending on the national debt would

authorize the CFPB’s funding mechanism.

The professors argue that the statute providing

for the building of the Smithsonian Institute supports

reversing the Fifth Circuit. But that enactment

undercuts the CFPB’s argument. There was no blank

check for the Smithsonian Institute. Rather, the

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statute provided that interest on the bequest made—

6% annually—would be used to build the museums

and fund their operations. See Act of Aug. 10, 1846,

ch. 178, § 5, 9 Stat. 102, 104. This differs from the

CFPB’s ability to sign its own check without any

meaningful limit on the amount it spends.

The antebellum statute providing for the

payment of interest on the national debt also does the

CFPB no favors. For a national debt to exist, Congress

must pass multiple statutes. First, it must decide to

go into debt. Recent negotiations between the

President and Congress have shown just how

contentious this type of legislation can be. After

deciding to authorize debt, Congress must

appropriate money for that debt to become a reality.

The statute authorizing payment of interest on

the national debt, Act of Feb. 9, 1847, ch. 7, 9 Stat.

123, must be read in tandem with these other

statutes. The nation did not assume debt without

knowing how much it would cost, that is, the interest

rate. And every time it made an appropriation

requiring new debt, Congress knew that it had to

expend money for interest on that debt. So Congress

did not write a blank check by allowing officers to pay

interest on the national debt. Rather, it passed

several pieces of legislation which, together,

amounted to a constitutional appropriation of funds.

After the deadline for top-side briefs, another

professor stepped forward and claimed that she found

new historical evidence supporting the CFPB’s

funding mechanism. See generally Christine Kexel

Chabot, The Founders’ Purse (June 20, 2023),

available at https://tinyurl.com/yjeu2474. But the

20

statutes she cites are even less relevant than the

others. For example, she contends that the Act of Aug.

12, 1790, ch. 47, 1 Stat. 186, is on point. But it’s not.

That was yet another statute relating to the

national debt. It provided that when revenue

exceeded expenditures during a year, a committee

was to use the surplus to buy back outstanding debt

at or below par value. See Act of August 12, 1790, 1

Stat. at 186. In other words, there was no blank check.

Rather, it gave the committee a fixed amount to

expend each year—the amount by which revenues

outpaced expenditures. This is the opposite of the

CFPB’s funding mechanism. Professor Chabot’s other

examples are so far afield that they do not warrant a

detailed explanation of how they are dissimilar to the

CFPB’s funding mechanism.

*

*

*

From our nation’s founding until the 2008

financial crisis, no executive agency was funded like

the CFPB is funded. The Fifth Circuit was thus

correct to hold that there is no historical precedent

supporting the CFPB’s arguments. Combined with

the text of the Appropriations Clause, the CFPB’s

funding mechanism is unconstitutional.

II.

THE JUDICIARY MUST ENFORCE CHECKS AND

BALANCES BETWEEN THE OTHER BRANCHES.

The professors lob another attack on the Fifth

Circuit’s decision. They claim that “judicial secondguessing of Congress’s funding choices is at odds with

the [Appropriation] Clause’s history.” Professors’ Br.

21

11 (capitalization altered). But that is not what a

ruling affirming the Fifth Circuit’s decision would do.

The Constitution sets up ways for each of the

three branches of government to check the power of

the others. Particularly when it comes to disputes

between the executive and legislative branches, there

must be some ultimate arbiter that decides which

party prevails.

The Framers agreed that the proper way to

adjudicate many of these disputes is through the

judicial branch. There, the courts can settle the

dispute through a reasoned decision.

Two examples prove the point. Congress likes

having power. But it often doesn’t like the work that

comes with that power. One solution to this problem

was giving the Attorney General the ability to

suspend deportation of an alien who was otherwise

removeable. See 8 U.S.C. § 1254(c)(1) (1982). To

maintain its power, Congress gave each house the

ability to “veto” the Attorney General’s decision to

suspend a deportation. See id. § 1254(c)(2).

The House used its authority to “veto” the

Attorney General’s decision about once in every two

hundred cases. See INS v. Chadha, 462 U.S. 919, 926

(1983) (citation omitted). Two of the individuals who

Congress wanted deported despite the Attorney

General’s decision challenged the constitutionality of

Section 1254(c)(2).

As the losing party usually does in separationof-powers disputes, the House of Representatives

argued that the case presented a political question

22

that was outside the Court’s Article III authority. See

Chadha, 462 U.S. at 940. But, as the Court explained,

“the presence of constitutional issues with significant

political overtones does not automatically invoke the

political question doctrine. Resolution of litigation

challenging the constitutional authority of one of the

three branches cannot be evaded by courts because

the issues have political implications in the sense

urged by Congress.” Id. at 942-43 (citation omitted).

The same understanding of judicial review

applies here. This case is about whether an executive

agency has power to fund itself without yearly

appropriations or whether Congress must approve

the funding. This is the type of purely legal question

that the Framers trusted the judicial branch to

decide. The argument that the Judiciary’s deciding a

case or controversy under Article III is somehow

second-guessing Congress is just an attempt at

avoiding judicial review of an unconstitutional

funding mechanism. See Chadha, 462 U.S. at 942-43.

Recently, the Court has reaffirmed the

principle that the judicial branch may resolve

separation-of-powers disputes. In Zivotofsky ex rel.

Zivotofsky v. Kerry, 566 U.S. 189 (2015) a child’s

parents sought to enforce a Congressional statute

requiring the Department of State to list “Israel” as

the place of birth for those born in Jerusalem. The

D.C. Circuit held that courts could not resolve the

dispute. This Court reversed because “the only real

question for the courts [wa]s whether the statute is

constitutional.” Id. at 196. Such decisions lie at the

heart of the judicial power. Id. (citing Marbury v.

Madison, 5 U.S. 137 (1803)).

23

Taken to its logical conclusion, the professors’

argument would bar this Court from considering the

constitutionality of any statute that becomes law.

Every time this Court declares a statute

unconstitutional it is, in the professors’ words,

“second-guessing” Congress’s decision. This argument

is nonsensical. Without the judicial branch’s ability to

consider the constitutionality of a statute, there

would be no limits on Congress’s power to enact laws.

The professors’ failure to realize this shows that their

only goal here is to save the CFPB’s structure, not

advance the rule of law.

CONCLUSION

This Court should affirm.

Respectfully submitted,

John M. Masslon II

Counsel of Record

Cory L. Andrews

WASHINGTON LEGAL FOUNDATION

2009 Massachusetts Ave. NW

Washington, DC 20036

(202) 588-0302

jmasslon@wlf.org

July 10, 2023