Supreme Court Grants President Increased Authority over Consumer Financial Agency

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The Supreme Court ordered changes to the Consumer Financial Protection Bureau Monday, ruling that a legal provision limiting the president’s power over the bureau’s director is unconstitutional.

In a 5-4 ruling, the court said Congress had overstepped in mandating that the agency be led by a single director appointed to a five-year term who could only be fired for “inefficiency, neglect of duty or malfeasance in office.”

The provision left the director unaccountable to the executive branch, creating an unconstitutional diminishment of presidential power, the court said.

“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.

While a 1935 decision “permitted Congress to give for-cause removal protection to a multimember body of experts who were balanced along partisan lines,” the court said the decision did not grant that authority to a single director vested with executive power.

The court changed the CFPB removal provision to make the director subject to presidential removal for any reason, ending a polarizing 10-year legal battle over the agency, which was created in the wake of the 2008 financial crisis to protect consumers from abusive financial-industry practices on products like mortgages, student loans and credit cards.

The bureau, first proposed by Sen. Elizabeth Warren, has long been a source of ire between the political parties, with Democrats touting a need to fight financial-industry excesses and Republicans wary of overreaching government regulation.

The Trump administration, including CFPB Director Kathy Kraninger, acknowledged that the bureau’s structure was unconstitutional in September, breaking from the Obama administration’s legal position.

Joining debt-relief firm Seila Law LLC, which brought the case against CFPB, Solicitor General Noel Francisco said that the CFPB effectively answers to no one during oral arguments in March.

The court’s decision could spell trouble for the similarly-structured Federal Housing Finance Agency, which oversees mortgage companies like Fannie Mae and Freddie Mac under the leadership of a director appointed to a five-year term who can only be removed for cause.