Thursday, 02 July, 2020

U.S. Supreme Court gives president more power over consumer financial agency

Supreme Court gives president more consumer agency control Supreme Court strikes down CFPB leadership structure
Cary Erickson | 29 June, 2020, 22:09

The Supreme Court found that because the CFPB director, unlike the typical federal official, isn't accountable to-that is, can not be fired by-the elected president of the United States who appointed the person, the agency's structure violates the separation of powers doctrine.

But Roberts writes the director of the agency "must be removable by the president at will". Justices Samuel Alito and Brett Kavanaugh joined Roberts and the liberal justices in concluding the restrictions involving the director could be severed.

But for the proponents of the Consumer Financial Protection Bureau, there is a possible upside to the ruling: Kathy Kraninger, the Trump-appointed CFPB director, can now be fired if the incumbent president loses. If former Vice President Joe Biden is elected as president, he would be free to fire Kraninger and replace her. That structure could leave a new president with a director chosen by the previous president for some or all of the new president's time in office.

"The CFPB's single-director structure contravenes this carefully calibrated system by vesting significant governmental power in the hands of a single individual accountable to no one", the chief justice wrote. "I respectfully dissent", wrote Justice Elena Kagan who was joined by Justices Sonia Sotomayor, Ruth Bader Ginsburg and Stephen Breyer.

"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", Roberts concluded. (Spoiler alert: "about the latter, nothing at all.) The majority offers the civics class version of separation of powers-call it the Schoolhouse Rock definition of the phrase", she said, referencing the educational, animated short films.

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Then-President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, creating the CFPB, and appointed Warren to take the lead role in establishing it.

But Warren said in a series of tweets in the wake of the Supreme Court's ruling that the "CFPB is here to stay".

"The Court may well be on a path to eliminate the independence of major federal agencies such as the Federal Reserve, the Federal Communications Commission, and other agencies headed by multiple members or commissioners who are protected from at-will removal by the President", Coglianese added. The director of that agency still works for the American people. Congress created the independent agency in 2010 to protect consumers from abuses in the banking and financial services industry that led to the 2008 financial meltdown.

But the Supreme Court's conservative justices have insisted in the past that the president's executive power means he may remove top officials for any reason.

The Consumer Financial Protection Bureau is relaxing rules created to shield Americans from abuse during the coronavirus crisis, saying the moves are necessary to give businesses flexibility during the pandemic.