SCOTUS to review constitutionality of financial watchdog agency
The U.S. Supreme Court agreed Friday to decide whether the single-director structure of the Consumer Financial Protection Bureau violates the separation of powers.
The Supreme Court agreed to hear the constitutional challenge by Seila Law, a debt-relief law firm based in California.
Seila Law had challenged the constitutionality of the CFPB structure in response to a civil investigative demand by the agency in an investigation of the law firm’s marketing practices. Seila Law argued that the CFPB is unconstitutional because it is headed by a single director who exercises considerable executive power but can be removed by the president only for cause.
The Supreme Court “has consistently recognized that the Constitution empowers the president to keep federal officers accountable by removing them from office,” the cert petition says.
Although the Supreme Court has previously upheld the constitutionality of multimember independent agencies, “the court has never upheld the constitutionality of an independent agency that exercises significant executive authority and is headed by a single person,” according to the petition.
The Supreme Court agreed to consider the constitutional issue and asked for briefing on an additional question: If the CFPB is found to be unconstitutional, can the for-cause removal provision be severed from the Dodd-Frank Act, the law that created the CFPB? The wide-ranging Dodd-Frank law, enacted in 2010, overhauled the nation’s financial system in response to the economic downturn.
The CFPB had sided with Seila Law, arguing that a for-cause restriction on the president’s ability to remove the CFPB director violated separation of powers. But the CFPB asserted that the for-cause provision can be severed, which would not invalidate the entire agency or the Dodd-Frank law.
Ruling in the case in May, the 9th U.S. Circuit Court of Appeals at San Francisco had upheld the CFPB structure. The 9th Circuit said the consumer agency’s structure is constitutional under Supreme Court precedent that upheld the structure of the Federal Trade Commission. The FTC’s commissioners also are removable only for cause.
The 9th Circuit decision cited the reasoning of the U.S. Court of Appeals for the District of Columbia Circuit, which upheld the CFPB structure in an en banc opinion in January 2018.
One of three dissenters in the D.C. Circuit case was Brett M. Kavanaugh, who was not yet a justice on the U.S. Supreme Court.
The case is Seila Law v. Consumer Financial Protection Bureau. The SCOTUSblog case page is here.