While the Supreme Court has deemed the Dodd-Frank Act’s for-cause removal provision unconstitutional, that alone will be severed from the law and the CFPB will go on functioning.
Weighing in on the Seila Law LLC v. Consumer Financial Protection Bureau case, the Supreme Court overturned earlier decisions by lower courts to the contrary. In the court’s opinion, the CFPB director’s powers need to be curtailed and the CFPB’s structure “violates the separation of powers.”
In its ruling, the Supreme Court noted, “the CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may therefore continue to operate, but its director, in light of our decision, must be removable by the President at will.”
There were four dissenters to the ruling, with five concurring. This ruling negates previous court positions that provide protection to commissioners of certain autonomous bodies, such as the Federal Trade Commission, stating that they can only be removed for cause.
Various consumer advocate groups, including the National Consumer Law Center, had filed an amicus curiae brief stating that if the Supreme Court found the for-cause removal provision to be unconstitutional, that clause alone should be cut off while preserving the other Dodd-Frank Act provisions and allowing the CFPB to continue operating.
Will CFPB continue to be autonomous?
The CFPB was created as a provision of the Dodd-Frank consumer protection act following the financial crisis, with the aim to protect consumers from financial institutions’ harmful, self-serving tactics. The independence of the agency is one aspect that aims to make the body free to pursue wrongdoers without any political pressure. With the Supreme Court’s current ruling, it remains to be seen how consumer-focused the agency will remain.
Ed Mierzwinski, senior director of federal consumer program, U.S. Public Interest Research Group Education Fund, noted in emailed comments, “The CFPB will go on, but its director will no longer head an independent agency that protects consumers as its only mission. Its director will now serve at the whim of the president, even if that president’s desire is for a politicized agency that carries out the requests of powerful Wall Street interests, without protecting consumers.”
And in a media release, Mike Landis, P.I.R.G. Education Fund’s litigation director, said, “The legal question in this case was whether the CFPB’s structure prohibits the president from carrying out his constitutional duties. Today, the Supreme Court ignored decades of precedent telling us that the answer is ‘no.’ Today’s decision gives more power to the president and creates the opportunity for undue political influence to outweigh reasoned decision-making by federal agencies.”
Lauren Saunders, NCLC associate director, said in a media release, “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.”
Future of the CFPB
It seems that aside from the question of how independent the CFPB will remain, there could be some change in its structure as well. There is pending legislation in the House and the Senate that addresses this question.
A House bill introduced by Rep. Blaine Luetkemeyer (R-Mo.) in March seeks “to amend the Consumer Financial Protection Act of 2010 to make the Bureau of Consumer Financial Protection an independent consumer financial protection commission, and for other purposes.”
This bill requires this commission to be made up of five members appointed by the president, with the “advice and consent” of the Senate. Sen. Deb Fischer (R-Neb.) has introduced a bill along similar lines.
The American Bankers Association favors this five-member structure for the CFPB. In a media release commenting on the Supreme Court decision, Rob Nichols, ABA’s president and CEO, noted that the ruling resolves some of the uncertainty around the agency’s structure and future.
“We still believe that Congress has an opportunity to strengthen the CFPB over the long term by converting the bureau into a five-member, bipartisan commission as envisioned in drafts of the Dodd-Frank Act,” Nichols said. “This important change would balance the bureau’s needs for independence and accountability, while broadening perspectives on rulemaking and enforcement. It would also ensure the CFPB’s long-term stability, which would benefit consumers, financial institutions and the broader economy.”