Supreme Court Agrees to Hear CFPB Constitutionality Case

The Supreme Court has agreed to hear a case challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB).  The case "Seila Law v CFPB could spell the end of the regulatory agency established by the Dodd Frank Wall Street Reform and Consumer Protection Act in 2008 given that the newest member of the Court,  Justice Brett Kavanaugh, has already ruled against the agency in a lower court.

CFPB began an investigation of Seila Law, a California firm that describes itself as offering a variety of legal services including consumer debt resolution, to determine if it had violated federal telemarketing laws.  Seila refused to comply with requests for information and documents, instead suing the agency. It argued that the single director structure of the agency was unconstitutional because that director can only be removed for cause, that is "for inefficiency, neglect of duty, or malfeasance in office."  That, they said, violates the separation of powers.  

The constitutionality of the structure was upheld in a federal appeals court last year on the basis of a 1935 case defending a similar structure for the Federal Trade Commission.  Amy Howe, writing in the SCOTUSBlog said Kavanaugh dissented from that ruling, calling the director's authority  "a power that is massive in scope, concentrated in a single person, and unaccountable to the President."  He agreed with the plaintiffs that the CFPB's "novel structure" unconstitutional.

The case raises the issue of whether the agency can itself survive if its structure is declared unconstitutional.  The Supreme Court has asked both sides to address this issue.  This has ramifications for other similarly structured agencies including the Federal Housing Finance Agency.

The House of Representatives has filed an amicus brief supporting CFPB while the current director, Kathy Kraninger, a Trump appointee has urged a review of the case, herself calling the agency's structure unconstitutional.  The ruling, which is thought highly likely to be made in Seila's favor given the current makeup of the court, is expected in June.  Ironically, should it allow the agency to survive, it could allow Trumps successor to remove and replace Kraninger if he loses the 2020 election.

A report from the Consumer Federation of America earlier this year found that CFPB has already dropped its enforcement activity under the current administration by 80 percent compared to its peak in 2015. The report also found monetary relief for consumers was down 96 percent.