Jun 29, 2020 - Politics & Policy

Supreme Court says CFPB's leadership structure is unconstitutional

The Supreme Court building

Photo: Saul Loeb/AFP via Getty Images

The Supreme Court said the structure of the Consumer Financial Protection Bureau is unconstitutional, but that the agency can keep operating under new rules.

Why it matters: The court’s ruling will make it easier for future presidents to fire the leader of the powerful watchdog agency, making it more subject to political vicissitudes.

Details: The CFPB was conceived by Sen. Elizabeth Warren (D-Mass.), before her days in elected office, and created by Congress in the wake of the 2008 financial collapse.

  • Congress created a somewhat unusual leadership structure for the bureau: a single director, rather than a board, who serves a fixed five-year term and can only be fired by the president for "inefficiency, neglect of duty, or malfeasance in office."
  • Critics said that gave the director too much power, arguing that he or she should be fireable for any reason, like Cabinet officials and other senior political appointees.

The Supreme Court agreed, ruling that presidents must be able to fire CFPB directors at will.

Between the lines: The unusual leadership structure was designed to prevent the gridlock that a board of directors could produce, while also providing some continuity from one administration to the next.

  • Today’s ruling will undermine those goals, but in the grand scheme of things, it’s not that terrible a blow to the agency.
  • The court had the opportunity to strike down the entire CFPB, but it did not go that far. The CFPB will now function more similarly to other parts of the executive branch.

Read the ruling.

Editor's note: This story was corrected to remove an erroneous reference to the CFPB's current leadership. CFPB director Kathy Kraninger was confirmed by the Senate in 2018.

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