Supreme Court will hear challenge to autonomy of consumer agency spearheaded by Elizabeth Warren


The Supreme Court said Friday it will hear a constitutional challenge to the semi-independent status of the Consumer Financial Protection Bureau, a government agency created by Congress in the wake of the Great Recession to police mortgage providers, credit card issuers and other consumer lenders.

At issue is whether the bureau’s director has too much protection from being fired by the president. Under the law, the director can be fired by the president only for cause. It was designed that way by then-professor Elizabeth Warren, now a U.S. senator from Massachusetts and a leading Democratic presidential contender, to protect the agency from outside political pressure.

The Trump administration urged the court to hear the case and reject the director’s semi-independent status. Since it launched in 2011, conservatives and business groups have long complained the agency has too much power.


A ruling in the case could signal whether the court’s conservative majority is ready to rein in an array of other semi-independent agencies, such as the Securities and Exchange Commission, the Federal Communications Commission or even the Federal Reserve.

Throughout the 20th century, Congress created independent agencies and deliberately shielded them from direct political control by the president. Usually, they are governed by a board with officials named by different presidents.

But in recent decades, some conservatives, including the late Justice Antonin Scalia, championed the “unitary executive” theory, which holds that all the executive power is entrusted solely to the president, who should be free to hire and fire any executive branch employee at will.

That fight will now play out in the dispute over the director of the CFPB. Congress created the bureau as part of the Dodd-Frank Act following the collapse of Wall Street and the home mortgage market. It was charged with protecting consumers from financial scams involving home loans, credit cards, student loans and banking. And it did so by issuing new regulations and launching investigations.

But it quickly became a prime target of finance businesses and their lawyers. Critics include Justice Brett M. Kavanaugh, who, as an appeals court judge, argued in dissent that it was unconstitutional to have a federal agency operated by a director who could not be removed by the president. Under the CFPB law, the president appoints a director with the approval of the Senate, but once appointed, the director may be removed only for “inefficiency, neglect of duty or malfeasance in office.”

Kavanaugh said the CFPB director had unusually broad powers that included issuing regulations, undertaking investigations and handing out sanctions and penalties. “The director enjoys more unilateral authority than any other official in any of the three branches of the U.S. government,” aside from the president himself, he wrote last year prior to his nomination to the high court.


Not surprisingly, the lawyers challenging the agency’s structure cited Kavanaugh’s dissent as reason for hearing the case.
The case before the court, Seila Law vs. CFPB, began when the bureau looked into allegations that a law firm based in Orange, Calif., had violated its rules regarding telemarketing sales.

The bureau sent a demand for documents, but the firm refused to comply and went to federal court in Santa Ana, arguing the agency itself was unconstitutional because of its structure.

U.S. District Judge Josephine L. Staton upheld the agency and its subpoena, and the 9th Circuit Court affirmed her decision in May.

Judge Paul Watford, writing for the appeals court, said the Supreme Court in the 1930s had upheld the principle of independent agency officials who were not subject to firing by the president. Moreover, in 1988, the court upheld Congress’ creation of independent prosecutors who were shielded from firing by the president.

Scalia dissented alone in that case, but more recently conservatives have cited his views as a basis for reversing course.

The court will hear arguments early next year and issue a ruling by late June.

Consumer advocates urged the court to uphold the agency and its semi-independent status. “The CFPB was created as a strong, independent agency with a director who could only be removed for cause so the bureau could counter the entrenched political power of the financial industry,” said Lisa Donner, executive director of Americans for Financial Reform, a coalition of advocacy groups.

But in agreeing to hear the case, the court said the lawyers should provide arguments on whether the provision on removing the director, if found unconstitutional, may be “severed from the Dodd-Frank Act.” That suggests that at least some of the justices might favor a very broad ruling undercutting the financial reform law.

The agency is currently led by former White House aide Kathy Kraninger, whom Trump appointed last year to a five-year term.

That came after the agency’s first director, Obama appointee Richard Cordray, resigned in November 2017, triggering a legal battle over whether the deputy director should take over, or the president could appoint someone else. Trump initially appointed White House budget chief Mick Mulvaney — a critic of the bureau and advocate for limiting in its powers — as its acting director.

The court also said Friday it will hear two cases to decide whether, and under what circumstances, immigrants facing deportation can seek a further appeal.

In March, the 9th Circuit broke new ground by ruling that an immigrant who was arrested for illegally crossing the border can nonetheless seek an appeal in federal court through a writ of habeas corpus.

The Trump administration, like the Obama and Bush administrations, had maintained that those who cross the border illegally are subject to “expedited removal” after a brief hearing. Government lawyers urged the high court to reverse the 9th Circuit decision in the case of Department of Homeland Security vs. Thuraissigiam.

At the same time, the court agreed to hear an appeal from Nidal Nasrallah, a Lebanese Druze man who said he would face torture if sent back to his homeland. He lost in the 11th Circuit Court in Atlanta, but the justices voted to hear the case of Nasrallah vs. Barr.