The Consumer Financial Protection Bureau is headed by a single director, who is appointed by the president and confirmed by the Senate to serve a five-year term. Once that director is in office, she can only be removed by the president for “inefficiency, neglect of duty, or malfeasance in office.” This morning both a California law firm under investigation by the CFPB and the CFPB itself told the Supreme Court that these restrictions on the removal of the bureau’s director are unconstitutional. If the justices agree, they must then decide what the remedy should be for the constitutional violation. The fate of the CFPB, as well as other agencies with similar structures, could hinge on their answer.
The dispute before the Supreme Court today began when the CFPB started an investigation into whether Seila Law, which provides debt-relief services to consumers, violated telemarketing sales rules. Seila Law refused to respond fully to the CFPB’s request for information and documents, prompting the agency to go to federal court in California to enforce the request. Seila Law argued that the CFPB lacked authority to issue the request. Specifically, the law firm contended, the CFPB’s structure is unconstitutional because it is led by only one director, who wields significant power but can only be removed “for cause” rather than “at will” – that is, for any reason.
The lower courts disagreed and upheld the agency’s request for information and documents. Seila Law then asked the Supreme Court to take up the question, which it agreed to do last fall. Because the CFPB agreed in its Supreme Court briefs that the bureau’s structure is unconstitutional, the justices appointed former U.S. solicitor general Paul Clement to defend the ruling of the U.S. Court of Appeals for the 9th Circuit.
Arguing for Seila Law, lawyer Kannon Shanmugam told the justices that the leadership structure of the CFPB is “unprecedented and unconstitutional.” The Constitution, he emphasized, empowers the president to keep senior government officials accountable by being able to remove them at will.
Justice Ruth Bader Ginsburg was skeptical about whether the justices needed to weigh in on the constitutionality of the CFPB’s structure at all. “This case,” she told Shanmugam, has an “academic quality” about it because the bureau’s request for information was ratified by the acting director, who can be removed by the president for any reason. How, Ginsburg asked, does the composition of the CFPB affect Seila Law?
Shanmugam countered that there is still a live dispute because Seila Law wants to have the request for information invalidated, while the government is seeking to enforce it. If anything, he asserted, that would be an issue for the lower courts to consider on remand.
Sotomayor also wondered aloud whether the justices needed to decide the merits of the case. Your client is not the president, she told Shanmugam. Shouldn’t we wait, Sotomayor queried, until there is an actual dispute between the president and the CFPB director whom he wants to fire?
Sotomayor also took issue with Shanmugam’s contention that the CFPB’s structure is “unprecedented.” There are at least two other agencies that are headed by a single individual and have limits on the president’s ability to remove them, she noted: the Office of Special Counsel and the Social Security Administration. And in her view, the Social Security Administration is even more powerful and ubiquitous than the CFPB.
Shanmugam pushed back, telling Sotomayor that the level of executive power that the CFPB wields is unprecedented because – unlike the SSA – it is able to take enforcement action.Read Full Article