Will Supreme Court decision threaten CFPB independence?

On Friday, the Supreme Court agreed to hear the case to determine the constitutionality of the leadership of the Consumer Financial Protection Bureau – a move that has provoked a variety of responses.

As it stands now, President Donald Trump cannot fire the
CFPB director unless it’s for cause. The previous decision made the CFPB
director fireable at will, but that’s not the case anymore as the case
continues to be challenged in court.

And now the Supreme Court will have the final say.

Various groups are torn on the hearing, with some saying a
committee to head the bureau will keep it more accountable and others saying a
ruling against the current structure could threaten the CFPB’s independence.

“If the Supreme Court invalidates the CFPB director’s
for-cause removal protection, it would imperil the agency’s ability to function
as intended, and it would allow free reign for bad financial actors to
influence the agency,” said Yvette Garcia Missri, Center for Responsible Lending litigation counsel. “We’ve already
seen payday lenders successfully push their plan to delay and weaken the payday
rule, and restitution for consumer victims wronged by industry has
significantly declined under the agency’s current political leadership.”

“Congress intentionally created the current structure so
that the consumer bureau could make independent and unbiased decisions to
protect consumers—even when those decisions are opposed by intense lobbying,”
Garcia Missri said. ”The CFPB has been highly effective in responding to
unlawful, abusive practices within the financial services industry. Its
effectiveness and ability to respond to unlawful practices quickly, is
attributable in part to its leadership by a single director and its insulation
from political influence and industry capture.”

But others believe a change in CPFB leadership could
actually bring more accountability to the bureau.

“We urge the Supreme Court to rule that the CFPB as
structured is unconstitutional in order to help ensure government agencies are
accountable to American consumers and voters,” said John Berlau, Competitive Enterprise Institute senior

“Under the leadership of current Director Kathleen
Kraninger, the CFPB has made some positive, free-market reforms that greatly
benefit consumers,” Berlau said. “But her good leadership doesn’t change our
belief that the CFPB must be made constitutionally accountable by having a
director subject to at-will removal by the person that Americans elect as their

Many in the housing industry agree that a board to lead the
bureau would be better than a single director.

“CUNA has consistently advocated for legislation that
provides for a multi-person, bipartisan commission to lead the bureau, as was
originally proposed by the Obama administration in 2009,” said Ryan
Donovan, Credit Union National Association chief advocacy
officer. “A commission is better for consumers because it would enhance the
independence of the bureau, bring diverse perspectives to the policymaking
table, ensure greater stability, and be more consistent with our country’s
democratic principles.”

But there is some worry that Supreme Court Justice Brett
Kavanaugh will be biased in this case.

“Justice Kavanaugh has demonstrated bias against the CFPB on
these exact issues and must recuse himself from this case,” Allied Progress Director Derek Martin
said. “He has previously weighed in on the specific question at stake in this
matter – whether the CFPB director can be fired without cause. This case
deserves to receive truly impartial judgment.”

Kavanaugh reportedly believes the CFPB, as it is currently structured, is unconstitutional.

And he’s written as much.

Back in 2016, Kavanaugh authored the Court of Appeals decision that declared the CFPB
unconstitutional due to its leadership structure. The case that led to the CFPB
being declared unconstitutional, which was brought by PHH, dealt
with how much power the agency’s director held.

In Kavanaugh’s mind, the director of the CFPB is the “single
most powerful official in the entire U.S. Government, other than the
President,” in terms of unilateral power.

The CFPB’s ruling could now change that.

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