Supreme Court Holds That Part of CFPB's Structure Is Unconstitutional

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Unlike most agencies led by multimember boards or commissions, the CFPB leader is a single director appointed by the president for a five-year term.

Today's decision represents an important victory for the fundamental principle that government officials should be accountable to the American people.

"But it's a very big deal for the separation of powers insofar as it makes it harder to have "independent" Executive Branch agencies", wrote University of Texas law professor Steve Vladeck. "Nothing in the Supreme Court ruling changes that".

The U.S. Supreme Court on Monday ruled that the legal stricture preventing the president from firing the head of the Consumer Financial Protection Bureau (CFPB) was unconstitutional, reasoning that the provision violated separation of powers doctrine.

Senate Banking Committee ranking member Sherrod Brown (D-Ohio) said at the time, "The CFPB under President Trump has used this pandemic as an excuse to weaken protections for consumers - enabling predatory lending, watering down credit reporting protections and fair lending laws, and making it easier for credit card and debit card companies to rip off their consumers". It also means that CFPB Director Kathy Kraninger can be fired at any time by the president.

While the Cambridge Democrat said the Supreme Court's ruling "handed over more power to Wall Street's army of lawyers and lobbyists to push out a director who fights for the American people", she noted that the CFPB remains an "independent agency" - as opposed to the "mouthful of mush" she had fiercely opposed a decade ago.

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Trump had faced a backlash after insisting on a rally in Oklahoma a week ago despite virus concerns. Giménez announced that all of his county's beaches will be closed July 3-7, and possibly longer.

"The agency may ... continue to operate, but its Director, in light of our decision, must be removable by the President at will", Chief Justice John Roberts wrote. While the President has full confidence in the current director of the CFPB and believes that she has fully upheld her statutory duties, the President also believes that no official should hold such enormous powers without, at least, being directly accountable to a democratically-elected President regardless of party affiliation.

The justices ruled in favor of California-based law firm Seila Law LLC, which challenged the agency's structure after being investigated by it.

Ultimately, the Supreme Court determined that the provisions of the CFPB relating to the removal of the director were not rooted in constitutional history or tradition and were therefore not compatible with the structure of the Constitution.

But Seila asked the CFPB to put its request for records aside, arguing it was invalid because the watchdog agency's structure was unconstitutional. It thus vacated the judgment of the Ninth Circuit Court and remanded the case for further proceedings. It was part of the 2010 Dodd-Frank Act and was charged with protecting consumers from abuses by financial institutions.

Trump has sought to undermine the CFPB. Trump appointed CFPB critic Mick Mulvaney, Trump's former chief of staff, to oversee the agency.

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