In Seila Law LLC v Consumer Financial Protection Bureau SCOTUS is reviewing the constitutionality of the CFPB structure. The president lacks the ability to remove the director of the CFPB from office. In fact the CFPB answers to almost no one.
The Dodd-Frank Act created the CFPB in 2010.
Dodd-Frank describes CFPB as a: “U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.” The Supreme Court will hear a challenge based on statutory restrictions.
The effect of a successful challenge
The plaintiff’s challenge to constitutionality is not merely an academic one. So what happens when the justices agree the restrictions violate the separation of powers? Their ruling would unravel the CFPB’s decisions in the nine years since its creation. The separation of powers is the idea that the Constitution divides the different functions of government among the executive, judicial and legislative branches of government.
The case is now before the Supreme Court. It was filed by Seila Law, a law firm that provides a variety of legal services to consumers. Among the services is assistance with the resolution of consumer debt. CFPB began an investigation into whether Seila had violated federal telemarketing laws.
In its efforts, CPFB sought information and documents from the firm. Seila objected to the request arguing the structure of the CFPB is unconstitutional. It observes a single director heads the CPFB. That director has significant power but cannot only be removed except “for cause.” That is, for a very good reason.
Of course, the 9th Circuit agrees with big government
The U.S. Court of Appeals for the 9th Circuit conceded that Seila’s argument was “not without force.” However, the 9th concluded the Supreme Court’s cases point in the other direction. It reasoned that although the director can only be removed for cause, that restriction does not “impede the President’s ability to perform his constitutional duty to ensure that the laws are faithfully executed.”
Seila went to the Supreme Court at the end of June, asking the justices to weigh in. In a brief filed last month, the CFPB agreed with Seila. Both parties agree the court should grant review. Further, they hold that the restriction on removal of the agency’s director “impermissibly infringes the separation of powers fundamental to our constitutional structure.” The justices granted Seila’s request.
SCOTUS also instructed Seila and the CFPB to brief an additional question: If the court agrees that the provision limiting the president’s ability to remove the CFPB director is unconstitutional; can that provision be separated from the rest of the Dodd-Frank Act? The CFPB argued that it can be. That position gives the court a way to strike down the specific provision without invalidating the entire CFPB. Now the Supreme Court hear oral argument will be early next year. In Seila Law LLC v Consumer Financial Protection Bureau SCOTUS will decide the constitutionality of the Consumer Financial Protection Bureau (CFPB) structure.