A divided U.S. Supreme Court said the president has broad power to fire the director of the
The justices on Monday backed the Trump administration in the separation-of-powers clash, striking down a provision in the 2010 Dodd-Frank Act that protected the director from being fired. The court stopped short of abolishing the agency altogether.
The ruling marks a major change for the CFPB, the brainchild of now-Senator
Supporters said the protections have helped ensure the bureau isn’t beholden to powerful banks. But the court said the Constitution doesn’t let Congress give an agency director so much freedom from elected officials.
“Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from presidential control,” Chief Justice
The case splintered the court along ideological lines, with the four liberal justices saying they would have left the removal protections intact.
The ruling could affect the Federal Housing Finance Agency, which regulates
Although the ruling is a victory for Trump’s administration, the decision paradoxically could undercut his appointed CFPB director,
President Barack Obama appointed the first CFPB director,
With Trump unable to fire him, Cordray stayed on for almost a year of the current president’s term before stepping down in 2017 to run unsuccessfully as a Democratic candidate for governor of Ohio.
“Today’s decision helps restore to Americans power over their government that the Dodd-Frank Act took away to protect entrenched and unelected bureaucrats in Washington,” White House Press Secretary Kayleigh McEnany said in a statement.
Warren tweeted that the court “just handed over more power to Wall Street’s army of lawyers and lobbyists to push out a director who fights for the American people.”
But she said in another tweet: “Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the @CFPB itself and the law that created it is constitutional. The CFPB is here to stay.”
A San Francisco-based federal appeals court had upheld the agency’s structure, relying on a 1935 Supreme Court decision that let Congress insulate the five members of the
Roberts said the CFPB is different from the FTC because it has a single director, rather than a multi-member commission. FTC commissioners serve seven-year terms that expire at different times, and no more than three members can be of the same political party.
Roberts said multi-member commissions were an exception to “the president’s unrestricted removal power” with regard to top government officials.
“Congress and the president established the CFPB to address financial practices that had brought on a devastating recession, and could do so again,” Kagan wrote. “Today’s decision wipes out a feature of that agency its creators thought fundamental to its mission -- a measure of independence from political pressure.”
Roberts said the removal restrictions could be severed from the rest of the Dodd-Frank Act, leaving the CFPB otherwise intact.
“There is nothing in the text or history of the Dodd-Frank Act that demonstrates Congress would have preferred no CFPB to a CFPB supervised by the president,” Roberts wrote.
The case before the court involved Seila Law, a California firm fighting a CFPB demand for information about its sales pitches to indebted consumers. The CFPB is investigating Seila’s possible role in a scheme that has already produced a $173 million court judgment against another firm, Morgan Drexen Inc.
The Supreme Court kicked the case back to a federal appeals court to determine whether the CFPB demand was valid.
The case is Seila Law v. CFPB, 19-7.
(Updates with excerpt from ruling in fifth paragraph)
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