Yesterday, the U.S. Supreme Court issued a ruling which gives President Trump greater authority over the Bureau of Consumer Financial Protection (CFPB). The 5-4 decision finds that a legal provision restricting the president’s ability to fire the Bureau Director is unconstitutional. However, the ruling also preserves the agency, striking the removal clause from the 2010 Dodd-Frank Act. Regardless of whether Trump will ever exercise this authority, the ruling is a victory for the Republican lawmakers pushing for more accountability at the regulator.
The decision strikes a balance between the Republican goal of establishing a bipartisan commission to oversee CFPB and the Democrats’ original vision of a politically independent watchdog for consumers.
The ruling—written by Chief Justice John Roberts—allows the agency to continue operations, but stipulates that the director must be removable by the president “at will” because “the structure of the CFPB violates the separation of powers.”
The Court argues that the Constitution is designed for accountability, which CFPB’s structure circumvents. "The CFPB’s single-Director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual who is neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is," Roberts wrote.
This reasoning has substantial implications for dozens of other independent agencies with single-director structures, including the Federal Housing Finance Agency (FHFA). Currently, the FHFA director is appointed to a five-year term and can only be removed for cause, just like the CFPB director (until yesterday).
The case, Seila Law LLC v. Consumer Financial Protection Bureau, was brought by a California debt relief firm that refused to cooperate with a CFPB investigation.