United States consumer watchdog chief can be fired by president, supreme court rules

Tanya Simon
June 29, 2020

Nor was it clear whether the decision really is limited to just the CFPB and possibly a couple of other single-director agencies, or whether Monday's decision is a first step by the court's conservative majority in a crusade to strip a vast array of agencies of their independence and make them subservient to the president.

"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.

The ruling eliminates the so-called "for cause" provision in Dodd-Frank but keeps the rest of the law and the agency intact.

Seila, which brought one of several similar legal challenges to the agency, lost in lower courts and appealed to the Supreme Court.

The CFPB was created to be free of the influence of the president.

Roberts' holding that the CFBP structure is unconstitutional was joined by Justices Clarence Thomas, Samuel A. Alito Jr., Neil M. Gorsuch and Brett M. Kavanaugh. "I respectfully dissent", wrote Justice Elena Kagan who was joined by Justices Sonia Sotomayor, Ruth Bader Ginsburg and Stephen Breyer. It also means that CFPB Director Kathy Kraninger can be fired at any time by the president.

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The pandemic has caused mass unemployment in many countries, as lockdowns kept people in their homes and froze economic activity. The hardest-hit parts of the U.S. are in the south and west, where many state leaders had pushed for early economic reopenings.

"Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control", Roberts concluded.

"Today's decision wipes out a feature of that agency its creators thought fundamental to its mission - a measure of independence from political pressure". But with the agency facing an unprecedented wave of consumer complaints as millions of laid-off workers deal with their creditors, lawmakers and consumer advocates charge that the bureau is exploiting the crisis to further a pro-industry agenda.

The Consumer Financial Protection Bureau is relaxing rules created to shield Americans from abuse during the coronavirus crisis, saying the moves are necessary to give businesses flexibility during the pandemic. All Americans who have credit cards, home mortgages or investments with major USA financial institutions have a stake in the CFPB and its regulation of Wall Street. The ruling, which gives a sitting president the ability to fire a CFPB director without cause, has far-reaching implications for other independent agencies with single-director structures such as the Federal Housing Finance Agency.

We are disappointed that the Court has made a decision to undermine the independence of the CFPB's structure and increase political influence over its work. "This outcome subjects consumers and the financial services industry to potentially radical regulatory shifts with each administration". Both have passionately argued in its defense.

The Supreme Court is seen in Washington, June 15, 2020. "The CFPB is here to stay".

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