High court decision to take up CFBP challenge spurs praise by industry, calls for commission

The Supreme Court’s announcement Friday that it will consider a case challenging the constitutionality of the federal consumer financial protection agency was greeted with praise from financial industry trade groups, who called for a commission, rather than a single director, to lead the agency.

Friday, the Supreme Court of the United States said it would consider a case brought by Seila Law, a debt relief company, that the Consumer Financial Protection Bureau (CFPB) is unconstitutional in that its director may only be removed by the president “for cause” and not at will. The group argued that the Supreme Court has “consistently recognized that the Constitution empowers the president to keep federal officers accountable by removing them from office.”

In May, the 9th U.S. Circuit Court of Appeals in San Francisco upheld the CFPB structure, stating the agency’s structure is constitutional under Supreme Court precedent that has upheld the structure of the Federal Trade Commission. The FTC’s commissioners also are removable only for cause.

On Friday, however, the Supreme Court said it would look at that decision, as well as the question of whether, if the CFPB is found to be unconstitutional, the for-cause removal provision can be severed from the Dodd-Frank Act Wall Street Reform and Consumer Protection, the 2010 law that created the CFPB.

In separate statements, the two largest national banking trade groups and one of the largest of the national credit union trade associations applauded the high court’s decision to review the ninth circuit decision – and all three urged a commission (of up to five members) to replace the single director structure of leadership at the agency.

The American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), and the National Association of Federally Insured Credit Unions (NAFCU) all voiced a preference for a multi-member commission to lead the agency, rather than a single director. The bank groups have both called for a five-member oversight body.

“ICBA is a long-time supporter of replacing single-director governance with a five-member commission as it would allow for diverse views and expertise on issues before the CFPB and build in a system of checks and balances,” the ICBA said in a statement. “A commission would promote measured and non-partisan agency decision making which over time is more likely to result in balanced, high-quality rules and effective consumer protection.”

The Credit Union National Association (CUNA), the largest credit union trade group, has also in the past called for a five-member commission.

Last month, the CFPB itself said it would no longer defend a provision in the Consumer Financial Protection Act limiting the president’s ability to remove the director for cause. But, Director Kathleen Kraninger said in a speech at that time, “that does not mean the Bureau will stop its work.”

Kraninger pointed to a provision in the CFPA that, should any provision of the bureau’s statute be found unconstitutional, the remainder of the act will not be affected.

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