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The Conflict Over the CFPB and What it Means for the Future 

by Brian J. Malcom, Charles W. Prueter

Published: December, 2017

Submission: January, 2018


The federal agency now well-known as the Consumer Financial Protection Bureau was established by Congress in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB is a uniquely independent agency, shielded from the executive branch in a way that other agencies are not. Doing away with that independence has the potential to significantly alter the CFPB and its regulatory work.

Dodd-Frank provides that the CFPB shall be headed by a single director, who is removable by the president only for cause. This leadership structure, which clearly isolates the CFPB from political pressure from the White House, is the focus of an ongoing appeal before the United States Court of Appeals for the D.C. Circuit. The Supreme Court has recognized that an essential aspect of the president’s constitutional authority is the power to remove at will subordinate officers in the executive branch, and that principle calls the CFPB’s for cause provision into question. The court has not yet issued a decision, but if it concludes that this leadership structure is indeed unconstitutional, the president would have the power to remove the director at will. The agency’s independence would be curbed, meaning that the CFPB would, like other agencies, be operated in accordance with the policy preferences of the president.

A struggle to fill the void recently left by the first director of the CFPB, Richard Cordray, is a sort of microcosm of why, politically speaking, this broader fight is unfolding. Cordray departed before the end of his term as director, and deputy director Leandra English then assumed the role of acting director. But President Trump acted quickly to appoint his budget director, Mick Mulvaney, to that same post. Litigation between English and the president ensued, as English sought to maintain her position and prevent Mulvaney from taking over. The final outcome of that litigation still is to be determined, but the fact that the agency, through English, is seeking to prevent the installation of the president’s appointee is a demonstration of just how significant the removal (and appointment) power is.

Thus, in the context of the D.C. Circuit appeal, if the CFPB loses its independence from the president, it will, by law, answer to the president in the same way that the Department of State or Department of Labor answers to the president. In other words, the CFPB as we know it, for better or worse, could be radically altered.

Of course, the Supreme Court is likely to have the opportunity to consider the question, but it is not certain that the Court would take up the case, or when it would do so. The issue could directly impact the agency’s policy goals during presidential terms, and, thus, could impact the regulations and enforcement actions the CFPB pursues in a given term. Local banks and financial institutions will likely keep a close eye on the Court’s decision as they assess the evolving regulatory climate.






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