Supreme Court Ruling Creates More Uncertainty for CFPB’s Future

Monday’s U.S. Supreme Court ruling upending the leadership structure of the Consumer Financial Protection Bureau did little to quell the arguments over the controversial agency and its work.

For credit union trade group and critics of the agency, the ruling did not go far enough since it did not rule the single-director structure unconstitutional. They said they hope the decision will increase the chance that Congress will enact legislation converting the agency into a commission.

For consumer advocates, the ruling went too far since it eliminated the CFPB’s independence from the president.

The Supreme Court ruled that a single-director structure, with the director only removable by the president for cause, was unconstitutional. The court said the single-director structure is legal as long as the president can remove the director at will.

That means any president can fire a CFPB director, the same way a cabinet secretary may be fired

Sen. Elizabeth Warren (D-Mass.), who is credited with forming the idea for the CFPB, said the ruling was a mixed bag.

“Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew,” she said. “The CFPB and itself and the law that created it is constitutional. The CFPB is here to stay.”

She added, however, that by allowing the president to remove the director at will, the court “just handed over more power to Wall Street’s army of lawyers and lobbyists to push out a director who fights for the American people.”

President Trump has complete confidence in current CFPB Director Kathy Kraninger, White House Press Secretary Kayleigh McEnany said Monday, adding  that Trump “also believes that no official should hold such immense powers without, at least, being directly accountable to a democratically-elected President regardless of party affiliation.”

Predictably, many Republicans applauded the ruling, while Democrats derided it, saying that it will result in less independence for the agency.

“Today, the Supreme Court recognized what Republicans have been saying for years—the CFPB’s leadership structure is unconstitutional,” House Financial Services Committee ranking Republican Rep. Patrick McHenry of North Carolina said.

“It flies in the face of the hard lessons we learned from the 2008 financial crisis, which devastated American families and wiped out generations of gains for Black and Latino households,” Senate Banking Committee ranking Democrat Sherrod Brown of Ohio. “That crisis was enabled by gaps in consumer protections and lax oversight by regulators that viewed Wall Street banks and other lenders as their ‘clients.’” 

Republicans and credit union trade groups have long pushed legislation that would convert the CFPB into a commission and it remains to be seen if Monday’s ruling will boost the chances that legislation could be enacted.

Sen. Deb Fischer (R-Neb.) recently introduced legislation that would convert the agency into a five-member commission. Several financial trade groups, including CUNA, NAFCU, the American Bankers Association and the Independent Community Bankers of America have endorsed the legislation.

Rep. Blaine Luetkemeyer (R-Mo.) introduced a companion bill in the House earlier this year.

“While the ruling is a step in the right direction, it does not change the fact that consumer protection regulation is controlled by a sole director, giving one person an enormous amount of power over the American economy,” Luetkemeyer said Monday.

Following the ruling, CUNA President/CEO Jim Nussle renewed his call to convert the agency into a commission. Today’s ruling cements the Bureau’s political dependence and subjects consumers and covered entities to wildly severe swings on the regulatory pendulum,” he said.

NAFCU President/CEO B. Dan Berger also supports the commission concept. “Regardless of how qualified one person may be, including the current leadership of the agency, a commission would allow multiple perspectives and robust discussion of consumer protection issues throughout the decision-making process,” he said.


Supreme Court Declares Single-Director Structure of CFPB Unconstitutional

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