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Seila Law v. CFPB

In 2010, Congress passed the Dodd-Frank Act, which created the Consumer Financial Protection Bureau (CFPB) to administer federal statutes that regulate financial transactions to protect consumers. Congress placed the CFPB under a single director, appointed by the President with the advice and consent of the Senate for a five-year term, and removable from office by the President during that term only for good cause. Since the CFPB’s creation, the constitutionality of the tenure-protection of its director has been challenged by the agency’s opponents. In this case, the Supreme Court will decide that issue.

The case arose when the CFPB issued a civil investigative demand to a law firm that provides debt-relief services. The CFPB sought to investigate whether the firm had charged illegal fees and misled consumers about. The law firm did not fully comply with the CFPB’s demand for documents about its activities, and the CFPB went to court to enforce the demand. The law firm argued that the CFPB investigation was unlawful because the restrictions on presidential removal of the CFPB’s director violate constitutional principles of separation of powers. A federal district court ruled for the CFPB, and the law firm appealed. On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed the constitutionality of the CFPB’s structure, relying in large part on the D.C. Circuit’s decision in PHH Corp. v. CFPB.

The law firm asked the U.S. Supreme Court to hear the case, and the Supreme Court granted review. The Court directed the parties to brief two questions: whether the for-cause removal limitation violates separation of powers and, if it does, whether the limitation is severable from the rest of the statutory provisions creating the CFPB. Before the Supreme Court, the CFPB reversed its own position on the constitutional issue and agreed with the view of the Trump Administration Justice Department that the CFPB’s structure is unconstitutional. The Trump administration argued that Congress may confer executive authority on an agency with a single director, such as the CFPB, only if the president can remove the director at will. The administration’s asserted that agency heads can be protected from being fired by the president without cause only if the agency is a multi-member commission – and perhaps not even then. However, the administration also took the position that the removal restriction is severable from the rest of the statute.

Because neither of the parties to the case was defending the CFPB’s constitutionality, the Supreme Court appointed an experienced Supreme Court advocate to defend the statute’s constitutionality. Public Citizen submitted an amicus curiae brief supporting his arguments, on behalf of itself and several other consumer groups, including Americans for Financial Reform Education Fund, Consumer Federation of America, Consumer Reports, the National Association of Consumer Advocates, Tzedek DC and U.S. PIRG Education Fund. Public Citizen’s brief explained that the Supreme Court’s decisions recognize that Congress has broad power to protect agency heads from being fired without cause by the president. We argued that, under the Court’s decisions, such tenure protection does not interfere with the President’s exercise of his constitutional powers. Under those decisions, our brief explained, the CFPB’s structure is constitutional. Arguments that its single-director structure poses a threat of “tyranny” and is historically novel do not provide a basis for holding that it violates constitutional separation-of-powers principles.

On June 29, 2020, the Court held that the provision protecting the CFPB director from being fired without cause by the president is unconstitutional. The Court rejected, however, arguments that the invalidity of that provision was not severable from the remainder of the statute. The Court thus gave the president the power to fire the CFPB’s director at will, while leaving the remainder of the law untouched.