Questions remain after Supreme Court rules in CFPB director case


The Consumer Financial Protection Bureau still exists even after a noteworthy Supreme Court decision arrived on Monday involving its director.

However, the handwringing about how the agency operates and can wield its regulatory influence over auto finance and other segments of financial services appears likely to continue for some time.

Via a 5-4 decision, the Supreme Court ruled 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.

“The CFPB dodged a bullet and remains in business, but it’s unclear what today’s ruling means for past CFPB actions,” Hudson Cook partner Lucy Morris said in a message to SubPrime Auto Finance News.

“Can these simply be ratified by the director, who now operates at the pleasure of the president? Today’s decision answers the threshold Constitutional issue, while leaving many questions unanswered,” continued Morris, who previously was a CFPB deputy enforcement director and now chair of Hudson Cook’s government practice group.

In an opinion written by Chief Justice John Roberts, the American Financial Services Association recapped that the Supreme Court held that, “the CFPB director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority.”

The ruling goes on to note, “The agency may therefore continue to operate, but its director, in light of our decision, must be removable by the president at will.” 

AFSA explained the court’s decision means — barring Congressional action to make additional statutory changes — that the CFPB director serves at the pleasure of the president in a similar way to cabinet-level appointees.

“AFSA is pleased that the court recognized the immense power wielded by the CFPB director,” the association said in a statement on its website. “We continue to believe that the bureau should be constructed as other regulatory commissions in Washington are. The association will continue to advocate for that structure, which would provide necessary consistency to the bureau.”

Consumer Bankers Associations president and chief executive officer Richard Hunt gave a cautious reaction to Monday’s development.

“The court’s ruling eliminates the bureau’s independence through the creation of an at-will director, further exacerbating the political influence that has already plagued the bureau,” Hunt said in a statement. “This outcome subjects consumers and the financial services industry to potentially radical regulatory shifts with each administration. It is inconceivable that Congress, which wanted to shield the bureau from political vagaries, would have approved that result. Congress had many opportunities to ensure the CFPB would be more independent and bipartisan.

“Rather than allowing judicial action to create a political agency Congress never intended, Congress should immediately pass legislation creating a bipartisan commission to lead the CFPB — just as the Democratic-led House of Representatives originally intended in 2009.”

Earlier this month, AFSA, the Consumer Bankers Association along with other 15 trade associations, submitted a letter to Sen. Deb Fischer, a Nebraska Republican, supporting her proposal that would transform the CFPB’s leadership structure.

“This isn’t a new issue for AFSA, however. The association has long sought a commission structure, similar to other federal regulatory bodies, to bring fair and consistent oversight of the financial services industry. AFSA pressed for a five-member, bipartisan commission structure at the bureau long before its actual founding,” the association said.

“During the debate over the Dodd-Frank Wall Street Reform Act, AFSA, many other trade associations and members of Congress from both sides of the aisle recommended a commission structure,” AFSA went on to say.

The National Association of Federally-Insured Credit Unions (NAFCU) and its president and CEO, Dan Berger, also reiterated the need for commission to oversee the CFPB.

“With today’s Supreme Court decision allowing the president to remove the CFPB Director at will, it is essential Congress advance legislation establishing a bipartisan commission at the bureau to promote greater transparency, accountability and long-term stability,” Berger said.

“A bipartisan board offers stable, long-term leadership that would better provide for the needs of consumers. NAFCU will continue to advocate for Congress to pass legislation reforming the CFPB’s single-director leadership structure into a bipartisan board.”

While a debate about a potential CFPB leadership commission is likely to continue, Hudson Cook plans to examine Monday’s Supreme Court decision and share its findings during a webinar on tap for 12:30 p.m. ET on Wednesday.

Morris, along with fellow Hudson Cook partners Allen Denson and Mark Rooney, intend to discuss the implications of the decision and its impact on past, pending and future CFPB enforcement actions, examinations and rulemakings.

Registration for that Hudson Cook webinar can be completed here.

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