A separate decision by the US Supreme Court on June 29 is a major setback for both the Consumer Financial Protection Bureau (CFPB) and consumers who rely on the agency. Since 2010, the agency's efforts have raised more than 25 million consumers, bringing in over $ 11 billion.
Although the case, known as Seila Law v Consumer Financial Protection Bureau, was discussed on March 3 of this year, its origins date back to 2017 when Seila Law, a California-based debt relief company, asked CFPB to suspend a civil law inquiry ( CID) who was looking for information to determine if she was involved in illegal debt relief practices.
CFPB refused to overturn the CID and appealed to a California federal court to pursue its interests. In response, Seila Law reiterated his challenge of independence to the agency director, who could only be dismissed by a president for cause to achieve the abolition of the entire agency as unconstitutional. "
The Supreme Court's 5-4 decision refuted the CFPB trademark: its independent director. By being able to dismiss an agency director for any reason, partisan interests can now influence whether a full, legally mandated 5-year term occurs or whether powerful companies are held accountable.
The majority of the Court argued that CFPB was "unique". "The CFPB director has no boss, colleague or voter to report to," Justice Roberts wrote in the majority opinion and was supported by Associate Justices Sam Alito, Neil Gorsuch, Brett Kavanaugh, and Clarence Thomas.
“However, the director has extensive decision-making powers, enforcement and decision-making powers over a significant portion of the US economy. The question before us is whether this regulation violates the separation of powers of the constitution. "We are therefore of the opinion that the structure of the CFPB violates the separation of powers," continued the Supreme Judge. The agency can therefore continue to operate, but its director, in light of our decision, must be removed by the president at will. "
The creation of an independent consumer agency was the legislative intention defined in the Dodd-Frank Wall Street Reform Act. After the worst financial crisis since the Great Depression in the 1930s, CFPB took direct responsibility for monitoring and enforcing a number of consumer issues, including mortgages, small loans, student debt, credit cards, and more.
This authority included the rights to conduct investigations, to summon subpoenas and civil investigation requests, to initiate administrative decisions, to pursue civil lawsuits before federal courts, and to make binding decisions in administrative proceedings.
The dissenting opinion of Justice Elena Kagan was followed by Associate Justices Ruth Bader Ginsburg, Stephen Breyer and Sonya Sotomayor.
“Throughout the nation's history, this Tribunal has left most of the executive structuring decisions to Congress and the President by acting through laws that both agree to. In particular, the Court has commonly allowed these two branches to create zones of administrative independence by restricting the President's authority to remove agency heads. If a precedent were a guide, that provision would have survived the encounter with this court – and thus the intended independence of the Consumer Financial Protection Bureau. "
"The Court does not respect its proper role today," continued the dissenting opinion. “It is recognized that this court has approved restrictions on the President's authority to remove agency heads, similar to that of the CFPB. Agencies with similar powers, agencies with similar missions, agencies with similar causes … Congress and the President created the CFPB to deal with financial practices that have triggered a devastating recession and could do so again . Today's decision wipes out a trait of this agency that its creators considered fundamental to its mission – a level of independence from political pressure. "
It is noteworthy that the current CFPB director made no effort during the Supreme Court review to explain or defend the agency.
In the remaining months of the current Congress, consumer advocates must now step up their vigilant role to ensure that as many other agency responsibilities can be maintained and pursued as required by law.
Many responded quickly and directly.
"Although the consumer bureau remains intact, it is worrying that the Court has weakened its political independence from the preferences of an administration or the political pressures of large financial institutions," said Diane Standaert, director of the Hope Policy Institute, a nonprofit organization that focuses on these concentrates underserved color communities and other low-income households. "As disclosed by COVID, the underlying differences in access to secure financial services form the basis for differences in economic opportunities, especially for color communities."
"The CFPB was created after the great recession to protect Americans from unscrupulous companies that have too much power to devastate the public," said Ed Mierzwinski, senior director of federal consumer programs for the US PIRG Education Fund. "Now the Supreme Court has agreed with the CFPB director, who has worked actively with the Trump administration and a debt collection agency to undermine the Presidium's independence from politically related special interests."
“Seila's decision therefore leaves the CFPB intact, but weakens the director's independence, which makes it more likely that the director will hesitate to cross the financial industry players who have the president's ear – as has been repeatedly done under the current leadership the CFPB has happened. Lauren Saunders, deputy director of the National Consumer Law Center.
"We have seen in this government how short-lived agency chiefs dare to express independent views, and it is unfortunate that the consumer watchdog has lost the critical independence that Congress gave him in dealing with the aftermath of the 2008 financial crisis Has." Saunders added. "Still, the CFPB survives as an agency, with the rest of its critical consumer protection tools intact, and it will be up to current and future CFPB directors to resist the political pressure to favor companies over consumers."
"The Supreme Court decision to remove the CFPB's causal clauses will make the urgency less effective and make consumers vulnerable to bad actors on Wall Street," said Will Corbett, process director at the Center for Responsible Lending.
“Predatory lenders and their Congress allies have consistently tried to weaken the independence of CFPB for political reasons. Today, the majority of the US Supreme Court has joined these efforts and has done financial harm to consumers for years, ”Corbett concluded.
Charlene Crowell is a senior fellow at the Center for Responsible Lending. She can be reached at email@example.com.