WASHINGTON–The Supreme Court announced it will hear a case regarding the constitutionality of the Consumer Financial Protection Bureau.
Both CUNA and NAFCU issued statements saying regardless of the outcome of the case, they continue to support replacing the single director with a multi-person board.
The case the Supreme Court will hear was brought by California-based Seila Law in which it is alleged the single director structure of the agency gives that person too much power in violation of the Constitution’s separation of powers. Directors are appointed for five-year terms. Interestingly, the CFPB itself as well as the Justice Department have previously stated they do not support the structure of the Bureau.
While other agencies also single directors, the language in the Dodd-Frank Act that created the Bureau a decade ago says the CFPB director may only be removed by the president “for inefficiency, neglect of duty, or malfeasance in office.” Seila Law has argued the CFPB’s broad law enforcement powers make that independence unconstitutional.
The Supreme Court said it will decide whether the Bureau can remain even if its structure is found to be unconstitutional. The highest court might find the Bureau is constitutional but the single director structure must change.
Lower Court Ruling
The Supreme Court will hear review a decision made by the 9thU.S. Circuit Court of Appeals in May of this year that went against Seila Law. In that case, Circuit Judge Paul Waford wrote, “Seila Law contends that an agency with the CFPB’s broad law-enforcement powers may not be headed by a single Director removable by the President only for cause. That argument is not without force. The Supreme Court is of course free to revisit those precedents, but we are not.”
Earlier, prior to joining the Supreme Court, Brett Kavanaugh wrote a dissent while on the Court of Appeals in which he argued the structure of the CFPB is unconstitutional.
NAFCU Response
“Regardless of how the Supreme Court rules – NAFCU still believes that a commission structure at the CFPB is absolutely essential to ensuring greater transparency and accountability,” said NAFCU president and CEO Dan Berger. “A commission would allow for more open debate, diversity of thought, and a stable leadership structure that would better serve consumers in the long-run. But until Congress acts to implement this change, we will continue to work alongside CFPB Director Kathy Kraninger, who has been open to addressing the needs of credit unions and their 118 million members. More so, as the only financial services trade association to oppose subjecting credit unions to CFPB authority, NAFCU will continue to push for the bureau to exempt credit unions from its rulemakings.”
CUNA Response
“CUNA has consistently advocated for legislation that provides for a multi-person, bipartisan commission to lead the Bureau, as was originally proposed by the Obama administration in 2009,” said CUNA’s chief advocacy officer, Ryan Donovan. “A commission is better for consumers because it would enhance the independence of the Bureau, bring diverse perspectives to the policymaking table, ensure greater stability, and be more consistent with our country’s democratic principles. We thank the Supreme Court for agreeing to consider the constitutionality of the CFPB’s current structure and intend to represent credit unions’ views before the court.”