Supreme Court Rules CFPB’s Structure Unconstitutional

United States Supreme Court

The Supreme Court ruled Monday that the structure of the Consumer Financial Protection Bureau, as currently constituted, is unconstitutional.

Eric C. Peck
 & 
June 29, 2020

The Supreme Court ruled Monday that the structure of the Consumer Financial Protection Bureau, as currently constituted, is unconstitutional. In a 5-4 decision, Chief Justice John Roberts said that the bureau will continue operations. However, its director could be removed by the president at will.

"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 wrote in the majority decision. "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will."

The ruling ends a near-decade-long battle over the case, “Seila Law LLC v. Consumer Financial Protection Bureau.”

Oyez, a legal research website focused on Supreme Court cases, reports the bureau, also known as the CFPB, was investigating Seila Law LLC, a debt-relief services law firm, among others. As part of its investigation, the CFPB issued a civil investigative demand to Seila Law that required it to respond to several requests for documents. Seila Law refused to comply, so the CFPB filed a district court petition to enforce compliance. The court granted the petition and ordered compliance.

Seila Law appealed the order on two grounds, one of which was that the CFPB is unconstitutionally structured. Seila Law argued that the bureau's structure violates the constitution’s separation of powers because it is an independent agency headed by a lone director who is nominated by the president and must be confirmed by the Senate to a five-year term, who exercises substantial executive power but can only be removed by the president for cause.

“As an accompanying and important component of the decision, the Court also concluded that the provision in the Dodd-Frank Act permitting severability of unconstitutional provisions (which include the structure of the CFPB) was applicable, with the result that the CFPB remains constitutionally intact, but now permits the President to remove the CFPB’s sole Director without cause," said Joseph Lynyak III, a partner at the international law firm of Dorsey & Whitney.

“Even after today’s ruling, the @CFPB is still an independent agency. The director of that agency still works for the American people. Not Donald Trump. Not Congress. Not the banking industry. Nothing in the Supreme Court ruling changes that,” said U.S. Sen. Elizabeth Warren (D-Massachusetts), the architect of the CFPB, via Twitter. “Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the @CFPB itself and the law that created it is constitutional. The CFPB is here to stay.”

This article originally appeared in the National Mortgage Professional print magazine.

Eric C. Peck is senior editor of National Mortgage Professional magazine and editor-in-chief of the National Mortgage Professional Magazine website.

Eric C. Peck is senior editor of National Mortgage Professional magazine and editor-in-chief of the National Mortgage Professional Magazine website.

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Supreme Court Rules CFPB’s Structure Unconstitutional
News

Supreme Court Rules CFPB’s Structure Unconstitutional

June 29, 2020
by
Eric C. Peck

The Supreme Court ruled Monday that the structure of the Consumer Financial Protection Bureau, as currently constituted, is unconstitutional. In a 5-4 decision, Chief Justice John Roberts said that the bureau will continue operations. However, its director could be removed by the president at will.

"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 wrote in the majority decision. "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will."

The ruling ends a near-decade-long battle over the case, “Seila Law LLC v. Consumer Financial Protection Bureau.”

Oyez, a legal research website focused on Supreme Court cases, reports the bureau, also known as the CFPB, was investigating Seila Law LLC, a debt-relief services law firm, among others. As part of its investigation, the CFPB issued a civil investigative demand to Seila Law that required it to respond to several requests for documents. Seila Law refused to comply, so the CFPB filed a district court petition to enforce compliance. The court granted the petition and ordered compliance.

Seila Law appealed the order on two grounds, one of which was that the CFPB is unconstitutionally structured. Seila Law argued that the bureau's structure violates the constitution’s separation of powers because it is an independent agency headed by a lone director who is nominated by the president and must be confirmed by the Senate to a five-year term, who exercises substantial executive power but can only be removed by the president for cause.

“As an accompanying and important component of the decision, the Court also concluded that the provision in the Dodd-Frank Act permitting severability of unconstitutional provisions (which include the structure of the CFPB) was applicable, with the result that the CFPB remains constitutionally intact, but now permits the President to remove the CFPB’s sole Director without cause," said Joseph Lynyak III, a partner at the international law firm of Dorsey & Whitney.

“Even after today’s ruling, the @CFPB is still an independent agency. The director of that agency still works for the American people. Not Donald Trump. Not Congress. Not the banking industry. Nothing in the Supreme Court ruling changes that,” said U.S. Sen. Elizabeth Warren (D-Massachusetts), the architect of the CFPB, via Twitter. “Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the @CFPB itself and the law that created it is constitutional. The CFPB is here to stay.”

Written by 
Eric C. Peck

Eric C. Peck is senior editor of National Mortgage Professional magazine and editor-in-chief of the National Mortgage Professional Magazine website.

ericp@ambizmedia.com

These articles are powered by National Mortgage Professional

The Supreme Court ruled Monday that the structure of the Consumer Financial Protection Bureau, as currently constituted, is unconstitutional. In a 5-4 decision, Chief Justice John Roberts said that the bureau will continue operations. However, its director could be removed by the president at will.

"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 wrote in the majority decision. "The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will."

The ruling ends a near-decade-long battle over the case, “Seila Law LLC v. Consumer Financial Protection Bureau.”

Oyez, a legal research website focused on Supreme Court cases, reports the bureau, also known as the CFPB, was investigating Seila Law LLC, a debt-relief services law firm, among others. As part of its investigation, the CFPB issued a civil investigative demand to Seila Law that required it to respond to several requests for documents. Seila Law refused to comply, so the CFPB filed a district court petition to enforce compliance. The court granted the petition and ordered compliance.

Seila Law appealed the order on two grounds, one of which was that the CFPB is unconstitutionally structured. Seila Law argued that the bureau's structure violates the constitution’s separation of powers because it is an independent agency headed by a lone director who is nominated by the president and must be confirmed by the Senate to a five-year term, who exercises substantial executive power but can only be removed by the president for cause.

“As an accompanying and important component of the decision, the Court also concluded that the provision in the Dodd-Frank Act permitting severability of unconstitutional provisions (which include the structure of the CFPB) was applicable, with the result that the CFPB remains constitutionally intact, but now permits the President to remove the CFPB’s sole Director without cause," said Joseph Lynyak III, a partner at the international law firm of Dorsey & Whitney.

“Even after today’s ruling, the @CFPB is still an independent agency. The director of that agency still works for the American people. Not Donald Trump. Not Congress. Not the banking industry. Nothing in the Supreme Court ruling changes that,” said U.S. Sen. Elizabeth Warren (D-Massachusetts), the architect of the CFPB, via Twitter. “Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the @CFPB itself and the law that created it is constitutional. The CFPB is here to stay.”

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