High court gives Trump power to fire consumer bureau chief

California 'sanctuary' law won't face Supreme Court review

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In making its ruling, the high court cited a key 1935 decision that “permitted Congress to give for-cause removal protection to a multimember body of experts who were balanced along partisan lines” but did not extend that authority to a single director vested with executive power.

All the court’s Republican appointees backed the decision eliminating restrictions on the dismissal of leaders of so-called single-member agencies, while all the Democratic-appointed justices said they would have left those limitations in place.

A then-Democratic-controlled Congress established the bureau as part of the landmark 2010 Dodd-Frank financial overhaul, mandating that it be led by a single director appointed to a five-year term who could only be fired for “inefficiency, neglect of duty or malfeasance in office” in a bid to insulate the agency from political interference. In a similar move, the authors of Dodd-Frank also chose to fund the CFPB through the Federal Reserve, rather than the congressional appropriations process.

Yet where Democrats see independence, Republicans see a lack of accountability. Republicans have long sought to overhaul the agency’s single-director structure and replace it with a bipartisan commission akin to the leadership of other financial regulators. GOP attacks have abated since Trump put his own people in charge of the bureau, but the leadership issue has never been resolved.

House Financial Services ranking member Patrick McHenry (R-N.C.) suggested that Republicans will resurrect their push for the creation of a commission to head the bureau in the wake of Monday’s decision.

“Today, the Supreme Court recognized what Republicans have been saying for years — the CFPB’s leadership structure is unconstitutional,” McHenry said in an e-mailed statement. “The responsibility to fix it now shifts back to Congress. I hope my Democrat colleagues will work with us.”

Some financial industry groups also revived their calls for legislation to install a bipartisan commission atop the agency.

“This outcome subjects consumers and the financial services industry to potentially radical regulatory shifts with each administration,” Consumer Bankers Association President and CEO Richard Hunt said in an e-mail. “It is inconceivable that Congress, which wanted to shield the Bureau from political vagaries, would have approved that result.”

“Rather than allowing judicial action to create a political agency Congress never intended, Congress should immediately pass legislation creating a bipartisan commission to lead the CFPB — just as the Democratic-led House of Representatives originally did in 2009,” Hunt said.

The political ramifications of the fight over whether the for-cause removal of the CFPB director violates the Constitution’s separation of powers were clear as the Supreme Court considered the case brought by Seila Law, a California debt relief firm that refused to cooperate with a bureau investigation.

The Trump administration, including CFPB Director Kathy Kraninger, in September reversed its initial position and said it agreed that the bureau is unconstitutionally structured.

Kraninger on Monday welcomed the ruling: “Today’s Supreme Court decision finally brings certainty to the operations of the Bureau,” she tweeted. “Consumers and market participants should understand that the same rules continue to govern the consumer financial marketplace.”

Trump officials’ decision not to back the agency had led the court to tap former solicitor general and conservative legal star Paul Clement to defend the agency. The current solicitor general, Noel Francisco, joined Seila Law in saying that the CFPB effectively answers to no one, during oral arguments in March.

“The president stands for election; the director of the CFPB does not,” Francisco told the court. “So if the director is insulated from presidential oversight, then her exercises of executive power are insulated from democratic control. And that’s not the structure that our Constitution creates and requires.”

House Democrats sent their general counsel to back Clement’s argument that the for-cause removal is only a modest restraint on the president’s power to remove someone and helps preserve the agency’s independence.

Clement referred to the coronavirus pandemic in his arguments, saying Congress would be perfectly within its rights to pass a law that the director of the Centers for Disease Control and Prevention can only be removed for cause: “That is the kind of sensible decision that Congress has been making for over 100 years,” he said.


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