In a 5-4 decision, the Supreme Court has ruled that the current structure of the Consumer Financial Protection Bureau is unconstitutional, although it left its existence intact. The single CFPB director was previously only able to be removed by the President for cause. In the majority ruling in Seila Law LLC vs. Consumer Financial Protection Bureau, the Court said that structure infringed on the powers of the executive branch.
“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,” wrote Chief Justice John Roberts. He was joined in the majority decision by Justices Samuel Alito, Neil Gorsuch, Brett Kavanaugh and Clarence Thomas.
While it alters the CFPB structure, the ruling didn’t go so far as to dismantle the agency. That “would trigger a major regulatory disruption and would leave appreciable damage to Congress’s work in the consumer-finance arena,” Roberts wrote.
In the dissenting opinion, Justice Elena Kagan said, “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 was joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor.
The White House, which declined to defend the agency, said in a statement it was “an important victory for the fundamental principle that government officials should be accountable to the American people.” In a departure from the Obama administration’s position, the Trump administration sided with challengers to the CFPB’s legality, including its organizational structure.
Sen. Elizabeth Warren (D-Mass.), who was instrumental in the creation of the bureau under President Obama, expressed dismay over the ruling. The Supreme Court “just handed over more power to Wall Street’s army of lawyers and lobbyists to push out a director who fights for the American people,” she tweeted.
In a tweet, current CFPB Director Kathleen Kraninger expressed approval and said the move “brings certainty to the operations of the bureau.”
“We will continue with our important mission of protecting consumers with no question that we are fully accountable to the President,” Kraninger said. “Consumers and market participants should understand that the same rules continue to govern the consumer financial marketplace.”
The ruling could affect other agencies which also operate under a single director, such as the Federal Housing Finance Agency.
Created by the Dodd-Frank Act in 2010 in the wake of the recession, the CFPB was intended to be an independent agency headed by a single director confirmed by the Senate. Appointed to a five-year term, the director was originally only able to be removed for malfeasance, inefficiency or neglect of duty.