WASHINGTON–In a 5-4 decision, the Supreme Court has ruled the director of the Consumer Financial Protection Bureau can be fired. CUNA called the decision disappointing, while NAFCU urged Congress to act to change the Bureau's leadership structure.
The decision today in the case Seila Law LLC v The Consumer Financial Protection Bureau ruled as unconstitutional a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that restricts the president’s ability to remove the CFPB director, except for cause.
But the decision is not a victory for those who have advocated for elimination of the CFPB itself. Three of the justices who had voted for the majority, along with the four dissenters, held that the for-cause provision could be separated from the remainder of the Dodd-Frank Act, which means the remainder of the CFPB will remain intact.
Writing for the majority, Chief Justice John Roberts said the CFPB director was unaccountable to the executive branch, creating an unconstitutional reduction of presidential power. “The CFPB’s single-director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual accountable to no one,” Roberts wrote.
In addition to Roberts, voting for the majority were Clarence Thomas, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh. The four liberal-leaning justices – Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan – voted against the decision. “Today’s decision wipes out a feature of that agency its creators thought fundamental to its mission – a measure of independence from political pressure,” Kagan wrote.
Often forgotten in the many years since the case has been brought is the decision involved Seila Law, a debt relief company that had ruled against the company. Seila Law responded by challenging the constitutionalilty of the CFPB itself, specifically its director structure.
NAFCU Response
In response to the decision, NAFCU called on Congress to address what remains a priority of the credit union trade groups, which is a change in the leadership structure of the Bureau.
“With today's Supreme Court decision allowing the President to remove the CFPB Director at will, it is essential Congress advance legislation establishing a bipartisan commission at the bureau to promote greater transparency, accountability and long-term stability,” said NAFCU President and CEO Dan Berger. “A bipartisan board offers stable, long-term leadership that would better provide for the needs of consumers. NAFCU will continue to advocate for Congress to pass legislation reforming the CFPB's single-director leadership structure into a bipartisan board.”
CUNA Response
“We are disappointed in the court’s decision," said CUNA President and CEO Jim Nussle. "Proponents of the Bureau sought to create an independent consumer regulator but the entity they established was independent only of the minority political party. Today’s ruling cements the Bureau’s political dependence and subjects consumers and covered entities to wildly severe swings on the regulatory pendulum. Whichever party holds the White House won today; everyone else lost. We call on Congress to put consumer protection ahead of political whimsy by creating a bipartisan multimember commission that can create tempered, transparent policies at the Bureau.”
Under the Court’s ruling, the CFPB Director may be removed by the president at will, leaving in place a single director that serves at the pleasure of the president, and putting consumer protection behind the political ideology of the ruling party. CUNA has long advocated for the agency to reflect the structure laid out in the initial drafts of the Dodd Frank Act, which laid out a bipartisan multimember commission. In his decision, Chief Justice John Roberts noted a multimember commission established by Congress would be a remedy to the CFPB's constitutional defects.
Consumer Groups Critical of Ruling
Among those critical of the decision have been consumer groups.
“The Seila Law decision leaves the CFPB intact, but weakens the director’s independence, making it more likely that the director will have to think twice before crossing politically powerful financial industry players that have the ear of the president,” said Lauren Saunders, associate director of the National Consumer Law Center. “This is unfortunate, because the CFPB should not be thinking about political ramifications when deciding whether to bring an enforcement action or to enact rules to address consumer protection problems. We have seen in this Administration how agency heads who have dared to express independent views have been short-lived, and it is unfortunate that the consumer watchdog has lost the critical independence that Congress gave it when addressing the fallout from the 2008 financial crisis.
“Nonetheless, the CFPB survives as an agency with the rest of its critical consumer protection tools intact, and it will be up to CFPB directors to do their best to resist political pressure not to do their jobs,” added Saunders.