CARY, N.C. –
More reaction rolled in stemming from Monday’s Supreme Court decision involving the Consumer Financial Protection Bureau.
While some legal experts are pondering long-term ramifications of the decision, nearly half of the attorneys general in the U.S. celebrated because the Supreme Court also agreed with the argument made in a multistate amicus brief connected to how these states could oversee auto-finance companies and other providers of financial services.
Led by New York attorney general Letitia James and joined by a coalition of 23 other attorneys general, they said they fought to ensure that the states can continue to benefit from “powerful tools” granted to both the CFPB and the states under Title X of the Dodd-Frank Act to safeguard against fraud and abusive consumer practices.
To recap, the Supreme Court ruled via a 5-4 decision in Seila Law LLC versus CFPB, determining the bureau’s leadership structure was unconstitutional and changed its single director from a position that could only be fired for cause to a what some officials are calling a “political position” removable at the will of the president.
In 2017, the coalition recapped that the CFPB commenced an investigation into the California law firm Seila Law for its debt-relief practices. Seila Law sought to block the investigation entirely, arguing that the CFPB is unconstitutionally structured because the agency’s director may only be terminated by the president “for inefficiency, neglect of duty, or malfeasance in office.”
According to Seila Law, this for-cause removal provision impinges on the executive power and violates the U.S. Constitution’s separation of powers clause. The U.S. District Court for the Central District of California and U.S. Court of Appeals for the Ninth Circuit both rejected Seila Law’s arguments and upheld the constitutionality of the CFPB.
While the Supreme Court on Monday reversed those decisions, holding that the Dodd-Frank Act’s for-cause removal provision is unconstitutional, the coaltion pointed out the Supreme Court further held that the CFPB’s creation and the powers it has to protect consumers are severable from that provision — the position that the amicus brief led by James had advocated.
While the CFPB director can now be removed at the will of the president, James called on the current CFPB director to work to protect consumers and ensure the financial protection of the American people, instead of focusing on protecting financial institutions.
“Following the Great Recession, the Dodd-Frank Act created the CFPB and granted vigorous enforcement powers to the states to ensure that consumers could never again be egregiously defrauded, deceived, or misled by private companies, and with today’s Supreme Court decision, that important work can continue,” James said in a news release. “Although we disagree with the Supreme Court’s ruling about the director’s independence, a separate ruling the court issued protects years of financial and consumer protections that have saved Americans hundreds of millions of dollars and remedied countless abusive and fraudulent practices.
“The CFPB can continue to be an independent enforcer of consumer protection and states can continue to pursue remedies under federal law to root out fraud and abusive consumer practices in the market. It’s time, however, that the current CFPB director actually focus on the financial well-being of the American people, instead of leaving them to fend for themselves,” James went on to say.
The other attorneys general involved in this coalition included:
Legal scholars chime in, too
David Driesen, a professor at the College of Law at Syracuse University, worries about how much more power the president now in connection with the CFPB.
“The Supreme Court today created a Presidential constitutional right to fire government officials for political reasons. President Trump’s abuse of firing authority and the history of the world show that such unchecked power threatens the rule of law and the survival of democracy,” Driesen said in a statement sent to SubPrime Auto Finance News.
New Civil Liberties Alliance (NCLA) elaborated about that point even further. The NCLA said it’s a nonpartisan, nonprofit civil rights group founded by legal scholar Philip Hamburger to protect constitutional freedoms from violations. NCLA said its public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
“The unelected and unaccountable CFPB director has been described as the ‘second most powerful person in Washington, D.C.,’ a situation created when Congress decided to insulate this particular agency head from any oversight by our elected officials. Fortunately, the Supreme Court understood that this structure violates the very foundation of our republic, ruling that it is the president who is the head of the executive branch, and all executive branch officials are answerable to him. Today’s ruling is a win for Constitutional order.” NCLA senior litigation counsel Harriet Hageman said in another statement to SubPrime Auto Finance News.
Michael DeGrandis, another NCLA senior litigation counsel, added, “Because the court mistakenly left the rest of the statute intact, it has created an entirely new problem that may be even more constitutionally pernicious than the first. The president now has total control over an agency with a direct pipeline to Federal Reserve funds, without any appropriations control from Congress. This unconstitutional setup should be struck down at the court’s first opportunity.”