Supreme Court Rules CFPB Director Can be Removed by President at Will

On June 29, the Supreme Court issued its decision in Seila Law LLC v. Consumer Financial Protection Bureau (CFPB). The Court, in a 5-4 vote, concluded that, because of the single executive structure of the CFPB, the President could remove the agency’s Director without the precedent of “inefficiency, neglect, or malfeasance.”

In 2017, the CFPB was looking to investigate the business practices of California-based law firm Seila Law LLC. The consumer regulatory agency ordered Seila Law to turn over certain information and documents related to its practices. Instead, Seila Law refused, claiming the CFPB’s leadership structure violated the separation of powers doctrine and was, therefore, unconstitutional.

The case went to the U.S. District Court for the Central District of California, who eventually ordered Seila Law to give the information to the CFPB. The Ninth Circuit Court of Appeals agreed with the District Court’s decision citing Humphrey’s Executor v. United States and Morrison v. Olson as precedent.

Seila Law appealed to the Supreme Court, who heard the case on March 3.

Chief Justice Roberts delivered the Court’s opinion. Joined by Justices Thomas, Alito, Gorsuch, and Kavanaugh. Justice Kagan, along with Justices Ginsburg, Breyer, and Sotomayor concurred in part and dissented in part with the majority’s opinion.

The Court ruled that having a single director running an independent agency that “wields significant executive power” has no legal precedent. The two prior cases that Roberts says involved exceptions Presidential power to remove officers — Humphrey’s Execution v. United States and Morrison v. Olson – do not apply.

In Humphrey’s, the Supreme Court ruled that “Congress could create expert agencies led by a group of principal officers removable by the President only for good cause.” In Morrison, the Court held that “Congress could provide tenure protections to certain inferior officers with narrowly defined duties.”

The Court says that because the CFPB is not led by a group and has significant, broad powers that it does not fall under these precedents.

Justice Kagan, issuing the dissenting opinion, argued that the Supreme Court has historically “left most decisions about how to structure the Executive Branch to Congress and the President.” She cited the creation of agencies with greater independence like the Federal Reserve, the Federal Trade Commission, and the National Labor Relations Board. While Congress created those agencies to be independent, each one has a commission as its leadership structure.

The other question that arose was whether the protection over the Director’s removal could be severed from the rest of the provisions within Dodd-Frank outlining the CFPB. The Court ruled that the protection clause is severable, but Justices Thomas and Gorsuch dissented that opinion. The minority opinion Justices, led by Kagan, concurred with the severability – meaning that the CFPB can continue to exist. However, the Court added a suggestion that Congress revise the CFPB, including its leadership structure.

Beau Brunson, Director of Policy and Regulation for Consumers’ Research, issued the following statement:

Today’s ruling in Seila Law LLC v. Consumer Financial Protection Bureau was a win for consumers because accountability in government matters. Consumers are citizens first, and no government agency should be operating outside the bounds of the constitution. As the court’s decision noted, this should not be the final improvement made to the agency. The opinion highlighted fundamental flaws that desperately need correction by Congress. The CFPB’s funding structure still has no Congressional oversight, and the Director has rule-making authority that goes far beyond any other agency under a single director.  While we are a step closer to a CFPB that works to the benefit of all consumers, it now falls to Congress to bring needed reforms to a poorly structured agency.

+ posts

Share

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

Subscribe to get the latest consumer news

More consumer News