A Constitutional Challenge to the Consumer Financial Protection Bureau

Today the Supreme Court hears a case that challenges the constitutional foundations of the federal Consumer Financial Protection Bureau (CFPB). In Seila Law LLC v. Consumer Financial Protection Bureau, the Court must first decide whether the Congress violated the separation of powers principle when it created the agency. If the Justices hold the CFPB’s leadership structure to be unconstitutional, they must then determine if the section of the Dodd-Frank Act that establishes the agency’s leadership structure can be severed from the rest of the statute, thereby preserving the CFPB.

Congress created the CFPB in 2010 following the economic devastation caused by the 2008 financial crisis. The CFPB’s governing structure calls for the appointment of a sole director, appointed by the president for a 5-year term and subject to the approval of the Senate. Unlike other federal agencies, however, where directors work “at will” and can be removed for any reason, the CFPB’s director can only be removed by the president “for cause.”

The challengers in this case claim that Congress’ decision to have a single director of the CFPB and to make that person removable only for cause violates Article II of the Constitution. Congress, they argue, intrudes on the authority of the executive branch when it vests substantial executive authority in an agency whose sole director is partially insulated from presidential control.

Both the federal district court and the U.S. Court of Appeals for the 9th Circuit ruled in favor of the CFPB, citing various precedents, including Humphrey’s Estate Executor v. United States, a 1935 case in which the Court upheld the constitutionality of the Federal Trade Commission, which had five commissioners who could only be removed for cause. When the Selia reached the Supreme Court, the Solicitor General’s office chose not to defend the CFPB, and instead supported the challenger’s position. The Court appointed  Paul Clement,  a former U.S. Solicitor General, to defend the CFPB’s structure.

If the Court finds that the CFPB’s structure is unconstitutional, there remains the question of whether this means the entire Dodd-Frank Act must fall or whether the CFPB leadership provision can be severed from the rest of the law.

According to its website, since its inception the CFPB has provided $11.8 billion in relief to 29 million consumers from its enforcement activities.


This Post was Written by ISCOTUS Fellow Alec Bodendorfer, Chicago-Kent Class of 2022, and edited by  ISCOTUS Co-Director and Chicago-Kent Faculty Member Christopher W. Schmidt.



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