Supreme Court Says Structure of CFPB is Unconstitutional

On Monday, June 29, 2020 the Supreme Court ruled that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional.

CFPB is a consumer watchdog. It regulates consumer financial products and services under existing federal consumer financial laws, enforce those laws judiciously, and educate and empower consumers to make informed financial decisions. The agency was created in 2010 in the wake of the financial crisis as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Writing for the majority, Chief Justice John Roberts said that “the structure of the CFPB violates the separation of powers. The CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.” The court ruled 5-4 along ideological lines.

SEILA LAW LLC v. CFPB

In 2017, the CFPB issued a civil investigative demand to Seila Law LLC, a California-based law firm that provides debt-related legal services to clients. The civil investigative demand (essentially a subpoena) sought information and documents related to the firm’s business practices.

Seila Law asked the CFPB to set aside the demand on the ground that the agency’s leadership by a single Director removable only for cause violated the separation of powers.