By: Esmat Hanano, IAC Student Intern Spring 2018
The Consumer Financial Protection Bureau (CFPB) received some good news on Wednesday; a federal appeals court upheld its constitutionality. Politico reported that the D.C. Circuit Court of Appeals ruled a provision in the Dodd-Frank Act that limited the president’s ability to remove the CFPB director during his or her five-year term was constitutionally valid. This comes on the heels of the resignation of the agency’s first director, Richard Cordray, and President Trump’s appointment of Mick Mulvaney to the position as acting director. The ruling is seen as a blow to the current administration in the wake of its push to deregulate the financial industry. The attack on the agency’s structure coupled with Wednesday’s ruling makes it highly likely that the case will reach the Supreme Court because of the implications the decision has for other independent agencies.
The CFPB is tasked with consumer protection in the financial industry. The agency’s goals are to “empower, enforce, and educate.” Some of the areas that the agency regulates are banks, securities firms, and debt collectors to name a few. The CFPB is the brainchild of Senator Elizabeth Warren, who first proposed the agency in 2007 as a then Harvard law professor. President Barrack Obama and congressional Democrats decided to create the agency in response to the 2008 financial crisis.
Along with being the newest independent agency, the CFPB is also one of the most powerful. The CFPB derives its power from two sources—its funding and its structure. Unlike other federal agencies, the CFPB is not funded through Congressional appropriation; rather, it receives funding directly from the Federal Reserve. This severely diminishes Congress’s broad oversight powers in regards to the agency.
The next point of strength for the CFPB is its structure; a single director heads the CFPB and he is protected from removal by specific provisions in the Dodd-Frank law that require good cause for him to be removed. This structure has led many lawmakers to label the CFPB unconstitutional. Lawmakers upset with the creation of the agency point to the protected position of the director as being the main affront to the constitution. They claim that the director is unaccountable to the president, and as such operates outside of the control of any branch of government.
The Department of Justice has switched sides since the initial court case and is now arguing that the structure of the CFPB is unconstitutional. The competing interests at play make this case likely to be a hot topic within the legal news world for the foreseeable future.