Source – qz.com<\/p>\n\n\n\n
On Oct. 18, the US Supreme Court agreed to review a case about the constitutionality of the Consumer Financial Protection Bureau\u2019s leadership structure, the outcome of which\u00a0threatens to unravel\u00a0nearly a decade of work by the federal watchdog created in 2010. And, strangely, the agency\u2014under director Kathy Kraninger, picked by Donald Trump and\u00a0barely confirmed by the Senate\u00a0in December 2018\u2014is now arguing against itself.<\/p>\n\n\n\n
The CFPB, which has\u00a0shut down numerous lending scams, was created in response to the 2008 financial meltdown and is in part\u00a0the brainchild\u00a0of Democratic presidential candidate and Massachusetts senator Elizabeth Warren. It\u2019s meant to ensure that banks, lenders, and financial-services providers treat consumers fairly, according to its\u00a0mission statement, and is part of the reorganized financial oversight scheme created by the 2010\u00a0Dodd\u2013Frank Wall Street Reform and Consumer Protection Act.<\/p>\n\n\n\n
Republicans and banking executives are no fans of the agency. The Trump administration, which is a staunch advocate of executive power, argues that the bureau\u2019s leadership structure is unconstitutional because its chief is a sole director with significant power in a five-year position and can only be removed by the president \u201cfor cause.\u201d It argues that this violates the requirement of \u201cseparation of powers\u201d in the Constitution. It also contends that the president, based on the language in the founding document, should be able to remove any of his officers for whatever reason or none at all,\u00a0and not just for cause.<\/p>\n\n\n\n
The bureau itself has successfully contended in the past that this requirement for the director ensures its independence from political pressures. The Ninth Circuit Court of Appeals, while not indifferent to the challengers\u2019 constitutional arguments, held that the CFPB didn\u2019t prevent the president from faithfully executing the laws as is his constitutional duty and so wasn\u2019t problematic.<\/p>\n\n\n\n
Seila Law, a firm involved in consumer-debt cases that was under investigation by the CFPB, challenged the agency\u2019s leadership structure after officials requested company documents. It turned to the high court for relief, seeking review. Now, the Department of Justice and the CFPB itself are in agreement with the law firm, and they in recent briefs to the high court also asked that the justices take the case.<\/p>\n\n\n\n
That leaves the House of Representatives alone defending the decision to give the CFPB director so much power. \u201cThis case presents an issue of significant importance to the House: the constitutionality of the for-cause removal protection that Congress enacted to provide the CFPB director with a measure of independence, consistent with the agency\u2019s functions as a financial regulator,\u201d the House\u2019s general counsel, Douglas Letter, argues\u00a0in an amicus brief\u00a0(pdf).<\/p>\n\n\n\n
The justices responded affirmatively to the request for review, but asked the parties to be prepared to answer an additional, very important question: If the court agrees that the provision limiting the president\u2019s ability to remove the CFPB director is unconstitutional, can that clause be separated from the rest of the Dodd-Frank Act? Or, in other words, would the work of the CFPB over the past nine years since its creation all be jeopardized by a finding that the director\u2019s role as created violates separation of powers?<\/p>\n\n\n\n
The bureau argues that the consequences of the case need not be so dramatic and that a decision about the director doesn\u2019t have to unravel the CFPB\u2019s decisions and actions. But it\u2019s the justices who will ultimately decide whether the CFPB director\u2019s role is unconstitutional and, if so, what that means for consumers in the grand scheme.<\/p>\n\n\n\n
There\u2019s already some indication of what at least one justice thinks. Brett Kavanaugh, while a judge on the DC Circuit Court of Appeals,\u00a0in one case\u00a0dissented from his colleagues\u2019 decision to reject challenges to the CFPB\u2019s leadership, calling the bureau director\u2019s power \u201cmassive in scope\u201d and \u201cunaccountable to the president.\u201d<\/p>\n