Supreme Court Urged Court to Maintain Structural Element of CFPB

A collective group of state attorneys general issued an amicus brief requesting the Supreme Court reject Seila Law LLC's argument that Title X of the Consumer Financial Protection Act should be discarded based on the alleged unconstitutionality of a provision that the president may only fire the agency's head for cause.

The brief was submitted on behalf of attorneys general in New York, New Jersey, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, Wisconsin and the District of Columbia. The brief stressed that beyond creating the CFPB, Title X provides states with "powerful new tools to combat fraud and abuse."

Title X of the CFPA created the Consumer Financial Protection Bureau (CFPB), an independent agency within the Board of Governors of the Federal Reserve System ("Federal Reserve") that regulates the offering and provision of consumer financial products and services under federal consumer financial laws.

Seila Law is seeking to overturn a Ninth Circuit ruling that it is "constitutionally permissible" for the CFPB's director to have for-cause removal protection, under which the president may only remove the director for "inefficiency, neglect of duty, or malfeasance in office." The Supreme Court agreed to take on the case. The decision came after a California federal judge ordered the firm to comply with a civil investigative demand issued by the CFPB in 2017. The investigation was launched to determine whether the firm had committed violations in the marketing and sale of debt-relief services. Seila Law has argued that the for-cause removal provision unduly restricts presidential authority and violates the Constitution's separation of powers, ultimately indicating that Title X needs to be nixed in its entirety.

"As the text of Title X makes clear and the legislative history confirms, [Congress'] foremost goal in structuring the CFPB was to create an agency independent from outside influence. To give the president the power to remove the director at will would radically reshape the CFPB, creating a mutant version of the agency that Congress envisioned - one that would still be unaccountable to Congress, yet fully within presidential control," the brief states.

"Severability is supported not only by the Dodd-Frank Act's express severability clause, but also by Congress's strongly expressed intent to create a more robust consumer-protection regime to avert another financial crisis. One of the ways that Congress sought to achieve that objective was by consolidating previously fragmented federal authority into a single agency, the CFPB," according to the brief.


Posted: February 17, 2020

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