On 6/29/2020, the U.S. Supreme Court ruled that Consumer Financial Protection Bureau (CFPB) is unconstitutionally structured.
Statement by PLF attorney, Oliver Dunford:
The CFPB, created to prevent another Great Recession, was given unprecedented powers and independence. The bureau is authorized to write policy, enforce violations, and adjudicate those violations.
At issue before the Court was the narrow question whether the restriction on the president’s power to remove the CFPB director violated the Constitution’s Separation of Powers. The Court sided with Pacific Legal Foundation, which submitted a friend-of-the-court brief, arguing that the CFPB’s unprecedented accumulation of powers, extra-constitutional funding source, and insulation from presidential oversight cannot be squared with the Constitution’s division of powers among the branches.
The Court’s holding, while not addressing all of the constitutional infirmities of the CFPB and “independent” executive agencies generally, is a step in the right direction for a return to the Framers’ government of limited and divided powers.
Can Congress restrict the President’s power to remove high-level officials in the Executive Branch? If so, as some lower courts have held, then the President cannot discharge his constitutional obligation to ensure that the “Laws [are] faithfully executed.” To meet this obligation, the President must have sufficient control over his administration—by removing high-level (or “principal”) officials if necessary.
In our friend-of-the-court brief, PLF argues that the Supreme Court should reverse the Ninth Circuit and hold that the President has the power to remove principal executive-branch officers at will.
- The Constitution divides all of the federal government’s powers into three distinct branches. This diffusion of power was established to protect the liberty of the people—to whom the government is accountable.
- Liberty is protected by the requirement that all three branches concur—the enactment of law by Congress, the enforcement of law by the Executive Branch, and an adjudicative process that both upholds the constitutionality of the law and issues a binding judgment—before one may be deprived of life, liberty, or property.
- All three branches are ultimately accountable to the people. Members of Congress and the President stand for election. Judges cannot be appointed unless the President and the Senate agree.
- The modern administrative state threatens the Framers’ careful balance—a threat best exemplified by the Consumer Financial Protection Bureau, an agency that exercises all three powers of government with only minimal oversight.
- The CFPB was vested with the legislative power (defining terms like “unfair” and “deceptive,” and adopting rules that have the force and effect of law); the executive power (enforcing alleged violations of consumer-protection laws and regulations); and judicial power (conducting administrative-enforcement actions).
- The CFPB is led by a sole individual (the Director), who is appointed to a five-year term and who may not be removed from office by the President except for “inefficiency, neglect of duty, or malfeasance in office.”
- Importantly, the CFPB gets its funding from the Federal Reserve, not—as required by the Constitution—through the Congressional appropriations process.
- In short, the CFPB exercises significant power but is immune from both presidential and congressional oversight. As then-Judge Kavanaugh stated, other than the President, the CFPB Director “enjoys more unilateral authority than any other official in any of the three branches of the U.S. Government.”
- The Supreme Court should—at the least—hold that the President, to carry out his duty to ensure that the laws are faithfully executed, must have the power to remove principal officers like the CFPB Director at will.
- If, however, the Court determines that its precedents require a different conclusion, the Court must reconsider those precedents and return to the Constitution’s first principles.
- Our unique point is that the Court must end its acquiescence to the ever-expanding administrative state. The novelty of the CFPB gives the Court a good reason to distinguish it from the Court’s precedents; but, if not, the Court should reconsider its precedents, particularly Humphrey’s Executor, that permit “independent” agencies to remain independent of the president.