California-based law firm is arguing the bureau’s director has been given too much authority, violating the separation of powers.
The Supreme Court has announced that it will consider the constitutionality of the consumer protection bureau established after the 2008 financial crisis that many Republicans have since tried to undermine.
California-based Seila Law LLC argues the structure of the Consumer Financial Protection Bureau gives the director too much authority since the president has limited ability to remove the individual from office, unlike other independent agencies that have a board. The firm says this violates the separation of powers established in the U.S. Constitution. Upon agreeing to take the case on Friday, the high court asked each side to consider if the bureau itself can remain intact even if its leadership structure is ruled unconstitutional.
The justices will most likely have to appoint someone to defend the agency since CFPB Director Kathy Kraninger said in September the bureau agrees with the Justice Department that the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the bureau, gives the director too much independence.
The Democratic-controlled House of Representatives announced its support for the CFPB in an amicus brief in October and has offered to defend the bureau. “Usually the appointment of an amicus lags behind the grant of review by a week or two,” said Amy Howe, SCOTUSblog co-founder and contributing reporter. “I would expect one [to be appointed to defend CFPB] relatively soon, but we just don't know yet.” The Constitutional Accountability Center, a nonprofit think tank and public interest law firm, has also offered to defend the CFPB.
Seila Law initially brought this case after the CFPB was investigating the firm for potential telemarketing violations. Seila refused to comply with requests for documents by arguing the bureau's structure is unconstitutional. After the firm lost its case in the district and San Francisco appeals courts it in June asked the Supreme Court to hear the case.
Supreme Court Justice Brett Kavanaugh has already weighed in during a similar case in 2016. When he was a judge on the U.S. Court of Appeals for the District of Columbia, he wrote in a dissent that the CFPB’s director has “power that is massive in scope, concentrated in a single person, and unaccountable to the president,” and agreed with the challenger that the “novel structure” violates the Constitution.
“I think those pro-big bank, anti-financial regulation types who are hoping the Dodd-Frank Act falls apart as a result of this are likely in for some heart break,” said Debra D’Agostino, founding partner of The Federal Practice Group. If the court were to rule against part of the act, she believes “they’ll just tweak it and the rest will stand.”