Supreme Court struggles with independence of Consumer Financial Protection Bureau

WASHINGTON – The Supreme Court heatedly debated the independent structure of the Consumer Financial Protection Bureau on Tuesday, sharply divided between the goal of autonomy and the powers of the presidency.

On one hand, Associate Justice Ruth Bader Ginsburg defended the way Congress designed the agency so that its director can be removed only for specific cause.

"What about the people that Congress was concerned about – that is, the consumers who were not well protected by the array of agencies that were handling these problems?" Ginsburg asked.

On the other hand, Associate Justice Brett Kavanaugh repeatedly noted that the next president could be stuck with an agency head he or she cannot fire.

"It's really the next president who's going to face the issue," Kavanaugh said. "The next president might have a completely different conception of consumer financial regulatory issues yet will be able to do nothing about it."

The challenge to the consumer agency's independence presented the high court with a major separation-of-powers dispute, one that has constitutional, political and practical implications.

Four top appellate lawyers argued several sides of the question for 70 minutes in the midst of a White House race in which Elizabeth Warren, who conceived of the agency as a Harvard Law School professor before winning election to the Senate, is seeking the presidency.

The Trump administration, represented by Solicitor General Noel Francisco, asked the court to declare the bureau unconstitutional. Otherwise, he said, Congress could go so far as to shield Cabinet secretaries from being fired without cause.

"The president stands for election. The director of the CFPB does not," Francisco said. "You can effectively saddle every new president with his predecessor's Cabinet."

Since the agency's structure was challenged by a private company and the administration refused to defend it, the court appointed former Solicitor General Paul Clement to do so. He was joined by Douglas Letter, representing the Democratic-controlled House of Representatives.

Clement said it makes sense to give some agencies independence. If Congress wanted to insulate the Centers for Disease Control from politics, the better to combat the current coronavirus outbreak, that would be its right, he said.

The consumer agency was created by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act as a response to the 2007-08 financial and mortgage-lending crisis to regulate banks and credit institutions. To guard its independence, it was designed to have a single director removable during five-year terms only for "inefficiency, neglect of duty, or malfeasance in office."

Two federal appeals courts have upheld the structure of the bureau. The full U.S. Court of Appeals for the District of Columbia Circuit did so in 2018, but with a vehement dissent from Kavanaugh in his last year as a member of that court.

"Independent agencies collectively constitute, in effect, a headless fourth branch of the U.S. government," Kavanaugh wrote. "Because of their massive power and the absence of presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances."

The Supreme Court originally upheld the constitutionality of independent agencies in 1935, but critics contend that precedent only protects those with multiple commissioners or board members, not single directors.

The Obama administration and the bureau's first director, Richard Cordray, opposed any change in the agency's structure. But Trump and the bureau's current director, Kathleen Kraninger, disagree.

Seila Law, which helps consumers in debt, brought the original challenge following a CFPB investigation. Its lawyer, Kannon Shanmugam, called the agency's structure "unprecedented and unconstitutional."

But Chief Justice John Roberts, who could be the swing vote between conservative justices who oppose the agency and liberals who defend it, worried about setting a new standard – somewhere between independence and subservience – that could lead to more court cases.

That, he said, "would be the worst of all possible worlds."

This article originally appeared on USA TODAY: Consumer Financial Protection Bureau's autonomy troubles high court