SCOTUS Strikes Down Structure of CFPB’s Director Position

John Shu

Today, in Seila Law, LLC v. Consumer Financial Protection Bureau, the Supreme Court struck down the CFPB’s leadership structure of a single director with a five-year term, removable only for inefficiency, neglect, or malfeasance, because it violates the separation of powers. The Court also separated this unconstitutional leadership structure from the rest of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, thus allowing the CFPB to continue existing:

In addition to being a historical anomaly, the CFPB’s single-Director configuration is incompatible with our constitutional structure. Aside from the sole exception of the Presidency, that structure scrupulously avoids concentrating power in the hands of any single individual. We therefore hold that the structure of the CFPB violates the separation of powers. We go on to hold that the CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will. (Roberts, C.J.)

The Court then expressed concern that the CFPB receives its funding directly from the Federal Reserve, and not through the usual congressional appropriations process.

Interestingly, Justice Kagan in dissent cited the Constitution’s text, stating, “Finally, recall the Constitution’s telltale silence: Nowhere does the text say anything about the President’s power to remove subordinate officials at will.”  Justice Kagan, in her November 2015 Harvard Law School lecture, famously said, “I think we’re all textualists now in a way that just was not remotely true when Justice Scalia joined the bench.”

The CFPB and this particular case have been the subject of many Federalist Society debates.  As of now, the president may fire at will the CFPB director, as with other agency heads.  Congress may amend the statute and create a multi-member board or commission to run the agency, in a manner similar to agencies such as the Securities & Exchange Commission.

Note: The Federalist Society hosted a Courthouse Steps Decision Teleforum on this case on June 30. See here for more information.

John Shu

Attorney and Legal Commentator


Federalist Society’s Litigation Practice Group

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