What happens if the court rules against the CFPB?

Pinch me! I think I’ve gone to constitutional law heaven.

On Friday, the Supreme Court granted a petition to hear a case challenging the constitutionality of the CFPB’s leadership structure. In deciding to take Seila Law LLC v. Consumer Financial Protection Bureau, the Justices will be deciding whether or not an independent agency can be overseen by a single director. Just how consequential this will be remains to be seen, but due to the unique history of this case, we actually have a few possible outcomes that the courts have already discussed.

First, some background. If you look in the Constitution, you will see that Article II gives the President the responsibility of making sure that the laws of the land are faithfully executed. This was historically interpreted as meaning that any individual responsible for implementing federal law could be removed by the President at will. Things got a little confusing when, in the 1935 case of Humphrey’s Executor; the Supreme Court held that Congress could create independent leadership structures for administrative agencies responsible for administering federal law. What makes agencies including the NCUA independent is that their leadership can only be removed by the President for cause. What makes the CFPB unique is that it vests its rulemaking power in a single independent director. Specifically, 12 USC 5491(c)(3) stipulates that the director can only be removed for “inefficiency, neglect of duty, or malfeasance.”


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