U.S. Supreme Court gives president more power over consumer financial agency

U.S. Supreme Court gives president more power over consumer financial agency

It also means that CFPB Director Kathy Kraninger can be fired at any time by the president.

The Consumer Financial Protection Bureau (CFPB), formed in the wake of the 2008 financial crash, should continue to exist even though one of the legal provisions that created it is unconstitutional, a divided Supreme Court ruled this morning.

"Instead of placing the agency under the leadership of a board with multiple members, Congress provided that the CFPB would be led by a single director, who serves for a longer term than the president and can not be removed by the president except for inefficiency, neglect or malfeasance". The court's four liberal justices concurred in the judgment as to severability. That structure could leave a new president with a director chosen by the previous president for some or all of the new president's time in office.

The Supreme Court found that because the CFPB director, unlike the typical federal official, isn't accountable to-that is, can not be fired by-the elected president of the United States who appointed the person, the agency's structure violates the separation of powers doctrine.

"We hold that the CFPB's leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers", Roberts wrote. (Spoiler alert: "about the latter, nothing at all.) The majority offers the civics class version of separation of powers - call it the Schoolhouse Rock definition of the phrase", she said, referencing the educational, animated short films. "I respectfully dissent", Kagan wrote. In organizing the CFPB, "Congress deviated from the structure of almost every other independent administrative agency in our history", Roberts wrote.

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Roberts Jr. wrote the majority opinion. Elizabeth Warren says her brainchild agency is "here to stay".

The court, in a 5-4 decision, stopped short of the much more drastic solution of invalidating the Consumer Financial Protection Bureau (CFPB), an agency that was the brainchild of MA senator Elizabeth Warren and was set up in 2011 under Democratic former president Barack Obama. The ruling, which gives a sitting president the ability to fire a CFPB director without cause, has far-reaching implications for other independent agencies with single-director structures such as the Federal Housing Finance Agency. But with the agency facing an unprecedented wave of consumer complaints as millions of laid-off workers deal with their creditors, lawmakers and consumer advocates charge that the bureau is exploiting the crisis to further a pro-industry agenda.

"The Court may well be on a path to eliminate the independence of major federal agencies such as the Federal Reserve, the Federal Communications Commission, and other agencies headed by multiple members or commissioners who are protected from at-will removal by the President", Coglianese added. Not the banking industry. "Nothing in the Supreme Court ruling changes that".

The case is Seila Law v. Consumer Financial Protection Bureau, No. 19-7, in the Supreme Court of the United States.

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