In response to the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau, a federal agency with approximately 1,500 employees that tackles everything from payday loans to financial literacy programs and helping consumers navigate the COVID-19 pandemic. The director of the CFPB, Kathy Kraninger, was appointed by President Donald Trump and confirmed by the Senate in December 2018 to serve a five-year term. Under the law that created the CFPB, Kraninger can be removed from her position only for “inefficiency, neglect of duty, or malfeasance in office.”
Today, in Seila Law v. Consumer Financial Protection Bureau, a divided Supreme Court ruled that these restrictions on the removal of the CFPB director are unconstitutional. But the justices stopped there, rejecting a request by a California law firm to hold that, if the leadership structure is unconstitutional, the court should strike down the rest of the act creating the CFPB as well.
The dispute that was the subject of today’s decision began when Seila Law, a California-based law firm that provides debt-relief services to consumers, was under investigation by the CFPB for possible violations of telemarketing sales rules. Seila Law challenged the CFPB’s authority to request documents from the firm, arguing that the bureau’s structure is unconstitutional because it has just one director, who has substantial power but can only be removed “for cause.” Instead, Seila Law argued, the director should be removable “at will” – that is, for any reason.
The U.S. Court of Appeals for the 9th Circuit ruled that the removal restrictions do not violate the Constitution. It cited a 1935 decision by the Supreme Court called Humphrey’s Executor v. United States, in which the justices rejected the argument that the structure of the Federal Trade Commission – with five members who could only be removed “for cause” – violated Article II of the Constitution, which charges the president with ensuring that the laws “be faithfully executed.”
Seila Law appealed to the Supreme Court, asking the justices to weigh in. When the CFPB agreed with Seila Law that the removal restrictions violate the Constitution, the justices appointed Paul Clement, a former U.S. solicitor general, to defend the 9th Circuit’s ruling.
In an opinion by Chief Justice John Roberts, the court ruled that the removal restrictions violate the Constitution’s separation of powers. Article II of the Constitution, Roberts explained, gives executive power to the president and empowers him to “take Care that the Laws be faithfully executed.” History and precedent have long confirmed that such a power includes the power to remove executive officials.Read Full Article