June 30, 2020
On June 29, the Supreme Court issued its long-awaited opinion in Seila Law LLC v. Consumer Financial Protection Bureau. The Court ruled 5-4 that the provision allowing the President to remove the Director of the CFPB only for cause was unconstitutional; the Justices also held 7-2 that the for-cause provision of the Dodd-Frank Act is severable, and the CFPB may stand without it.
The Bureau thus survived the constitutional attack with its independence reduced but otherwise intact.
Chief Justice Roberts, writing for the majority, juxtaposed the President’s removal power, which he wrote “has long been confirmed by history and precedent,” with the structure of the CFPB, which he opined “has no foothold in history or tradition.” The Chief Justice found that the structure put too much power in the hands of an individual, and that the Director could not be “meaningfully controlled” by the President. Therefore, the for-cause provision violated the separation of powers. Were it otherwise, the chief Justice wrote, “an unlucky President might get elected on a consumer-protection platform and enter office only to find herself saddled with a holdover Director from a competing political party who is dead set against that agenda.” (This is almost certainly the first time that the phrase “consumer-protection platform” has ever appeared in a Supreme Court opinion.)
Justice Kagan, joined by Justices Ginsburg, Breyer and Sotomayor, dissented on the question of the Director’s removal, arguing that the decision “wipes out a feature of that agency its creators thought fundamental to its mission—a measure of independence from political pressure.” Justice Kagan found it ironic that the majority was so solicitous of an agency head’s alleged ability to frustrate a President’s design: “And now consider how the dispute ends,” she wrote of the majority’s concern with effectuating the results of presidential elections, “—with five unelected judges rejecting the result of that democratic process.”
On the question of severability, seven Justices agreed that the CFPB could stand even in the absence of a director removable only for cause. As Chief Justice Roberts explained, “We think it clear that Congress would prefer that we use a scalpel rather than a bulldozer in curing the constitutional defect we identify today.” Only Justices Thomas and Gorsuch dissented from this part of the decision.
The Center for Consumer Law & Economic Justice (CCLEJ), along with other academic centers and consumer advocacy organizations, filed an amicus brief arguing that if the Court found the for-cause provision unconstitutional, it should sever it and preserve the CFPB. The Court followed this logic, writing that “there is nothing in the text or history of the Dodd-Frank Act that demonstrates Congress would have preferred no CFPB to a CFPB supervised by the President. Quite the opposite.” The Court recognized the chaos that could result from a decision simply declaring the for-cause provision unconstitutional without more. As the consumer organizations’ amicus brief observed, “the CFPB has contributed to creating a more stable economy and a more accountable playing field in the marketplace as Congress intended.” To completely dismantle it would have spelled disaster.
An unfortunate consequence of the Court’s decision is that the CFPB Director may be more hesitant to make decisions that displease the White House, since the President can now remove the Director for any reason. But the fact that the Bureau will continue to exist, and will continue to do the work that has provided over $11 billion in relief to consumers over the past decade, is the most consequential result of the Court’s decision.
“In the fullness of time this may not be considered a particularly significant administrative law decision,” observed Ted Mermin, who directs CCLEJ. “But it is surely an important one today.”