Justice Clarence Thomas asked during the arguments whether the agency's setup "eviscerates the kind of exacting control that Congress usually exercises in the appropriations process."

"Are there any limits on what Congress can do?" Thomas asked. 

Elizabeth B. Prelogar, the acting solicitor general representing the CFPB, repeatedly urged the justices to focus on the language of the Appropriations Clause, which states that "no money shall be drawn from the Treasury, but in consequence of appropriations made by law."

"This is not novel," Prelogar said of the CFPB's funding structure, noting that since 1789 Congress has used its broad delegation authority to set funding levels for agencies as varied as the U.S. Customs Service, the U.S. Postal Service and the U.S. Mint.  

The issue before the court is whether the U.S. Court of Appeals for the 5th Circuit erred last year when it found that the CFPB violated the Appropriations Clause. A three-judge panel of the 5th Circuit, all appointed by President Trump, found that the agency's funding through the Federal Reserve System meant it was "doubly insulated" from congressional control.  

Justice Brett M. Kavanaugh threw cold water on the idea that the Congress has no control over the agency. He said there would be a problem if a future Congress could not change the CFPB's funding — but that Congress can do so at any time. 

"If the majority of the Congress said they were not going to fund the agency tomorrow, they could do that," Kavanaugh said. 

The case began in 2018, when two Texas trade groups sued the CFPB, challenging the bureau's ability to issue the first federal payday lending rule — which has still not gone into effect. The 5th Circuit judges found that the CFPB had the authority to issue the payday rule but ruled that its funding was unconstitutional. In November, the CFPB petitioned the court to review the 5th Circuit's decision.

Noel J. Francisco, a former solicitor general representing the payday groups, struggled to convince a majority of the justices that Congress had inappropriately delegated its authority to the CFPB. He argued that because the CFPB's director can ask the Federal Reserve System for funding, and that the amount is not fixed but rather subject to a cap, that Congress had delegated its authority to the executive branch.  

"Congress can't say to the president, spend anything you want," Francisco said. "Congress has to determine a set amount that it plans to be spending."

He said the case was about "checks and balances," and claimed that Congress cannot allow the executive branch to pick its funding. But Francisco appeared to have an uphill climb trying to convince some of the justices that the executive branch had somehow been given more authority through the CFPB's funding structure. 

"Where in the text of the Appropriations Clause does it say the government had to fix the amount?" asked Justice Ketanji Brown Jackson, in a series of tense back-and-forth questions of Francisco. 

Justice Elena Kagan said the court has "rejected" such an argument in the past.

"If you go back to the founding era statutes, it says [funding] an amount not to exceed X," Kagan said. "The argument that you're making, not like there are 22 different things that come together in this particular statute to create a unicorn, but that seems a much more fundamental argument — and one that has been decisively rejected by our history."

Justice Neil M. Gorsuch asked if Congress could pass a law setting the funding for an agency without an upper limit.

"Could it be a trillion dollars?" Gorsuch asked.

Justice Samuel A. Alito Jr. took up the same line of questioning.

"I just want to understand what you think the limiting principle is?" Alito asked Francisco. "Let's take the [Federal Trade Commission,] which I think had a budget of $430 million. So let's say there's a law that allocates forever up to $1 billion adjusted for inflation to the FTC to use as the FTC seems fit. Would that be consistent with the Appropriations Clause?"

To which Francisco responded: "I think the hypothetical would effectively be a standing uncapped appropriation because, of course, the FTC would never reach that amount."

Justice Sonia Sotomayor seemed very confused by Francisco's arguments

"I'm sorry, I'm trying to understand your argument and I'm at a total loss," she said. 

Kavanaugh also noted that the CFPB was no longer an independent agency because in 2020 the Supreme Court ruled that the CFPB's single director could not be shielded from being fired by the president. 

Alito and Thomas both asked Prelogar, the solicitor general representing the government, what was the best historical example of an agency structured similar to the CFPB. 

"I think our best example historically is the Customs Service," she said. "The first Congress created the Customs Service in 1789. It gave the Customs Service a standing, uncapped source of funding from the revenues that the Customs Service collected … and the Customs Service was one of the most powerful agencies that was originally created, because it was so important to have a stream of funding for the new republic."

The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America Ltd., is only the second case heard by the court so far this term.

The CFPB case is being closely watched for its impact on not only the agency's own funding structure but those of other regulatory agencies as well. Though some experts have suggested that the Supreme Court could undo all of the bureau's past actions and rules, Francisco suggested that wasn't the case. 

The Supreme Court's decision is expected by April of 2024.