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Seila Law v. CFPB, 140 S. Ct. 2183 (2020)
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The Supreme Court held that the removal restrictions statutorily applied to the director of the Consumer Financial Protection Bureau were unconstitutionally restrictive and severable from the rest of the Dodd-Frank Act.
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Following the 2008 financial crisis, the Consumer Financial Protection Bureau (CFPB), was established by the Dodd-Frank Act as an independent regulatory agency tasked with ensuring that consumer debt products are safe and transparent. The CFPB was led by a single Director, appointed by the President with the advice and consent of the Senate, for a five-year term, during which the President may remove the Director only for “inefficiency, neglect of duty, or malfeasance” [12 U.S.C. 5491(c)(1),(3)].
In 2017, CFPB issued a civil investigative demand to Seila, a law firm that provides debt-related legal services. Seila asked the CFPB to set aside the investigation demand, which was declined. The CFPB filed a petition to enforce the investigation demand, to which the district court agreed. The Ninth Circuit affirmed an order requiring that Seila comply.
The Supreme Court vacated the lower courts’ decision, holding the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers. Precedent has established two exceptions to the President’s unrestricted removal power: for a multi-member body of experts who were balanced along partisan lines, appointed to staggered terms, performed only “quasi-legislative” and “quasi-judicial functions,” and were not to exercise executive power (see. Humphrey’s Executor v. United States, 295 U.S. 602), and for an inferior officer—an independent counsel—who had limited duties and no policymaking or administrative authority (see. Morrison v. Olson, 487 U.S. 654). Neither of those exceptions applies to CFPB.
The Court declined to extend the precedents to an independent agency led by a single Director and vested with significant executive power. CFPB’s structure had no foothold in history or tradition and was incompatible with the Constitution, which—with the sole exception of the Presidency—avoids concentrating power in the hands of any single individual. The Director’s five-year term and receipt of funds outside the appropriations process heighten the concern that the agency will slip from the Executive’s control and from that of the people. The Court found the Director’s removal protection severable from the other provisions of Dodd-Frank that establish CFPB.
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