In his majority opinion in the 2018 case PHH Corporation v. Consumer Financial Protection Bureau, then-appellate Judge Brett Kavanaugh wrote of the Consumer Financial Protection Bureau (CFPB), “Indeed, other than the President, the Director enjoys more unilateral authority than any other official in any of the three branches of the U.S. Government.”
But after yesterday’s major Supreme Court ruling, today, the power granted to the sole CFPB Director has been dramatically lessened. In the 5-4 decision, the Court ruled that while the consumer agency is itself constitutional, provisions insulating the Director from being dismissed by the president are unconstitutional. Now, the president can remove the director for any reason, which is in-line with nearly all other agency heads.
In the opinion for the majority, Chief Justice Roberts noted that the leadership structure of the CFPB “has no foothold in history or tradition,” and that Congress has given protection from removal to principal officers of agencies in just four “isolated instances.” Justice Roberts also explained that “the CFPB’s single Director configuration is also incompatible with the structure of the Constitution, which — with the sole exception of the Presidency — scrupulously avoids concentrating power in the hands of any single individual.”
It’s a stinging observation by the Supreme Court that the CFPB is a uniquely powerful, yet unaccountable bureaucratic agency.
Despite yesterday’s ruling, taxpayers should be concerned that the CFPB still remains one of the most powerful and least transparent agencies of the federal bureaucracy. Even the current Director, Kathy Kraninger, has acknowledged that the sole position has too much independence and power. Still under current law, any Director can unilaterally decide that any business offering a credit card, small dollar loan, or mortgage, could be regulated out of existence simply for being “politically unsavory” or “abusive.” This approach, employed by former Director Richard Cordray, is the embodiment of why oversight and transparency are needed to hold bureaucrats accountable for their actions.
Unlike the vast majority of other agencies in government, the Bureau is not directly funded by Congress. Since the CFPB doesn’t need congressional approval to access resources, there is “no power of the purse” to control an agency with significant regulatory power. In addition, having only one single director is out of step with virtually every other consumer enforcement agency. In sum, the structure of the CFPB is fundamentally flawed and largely unanswerable to the president, Congress, and most importantly, American taxpayers.
While the likelihood of a repeal of the CFPB is virtually nonexistent, NTU believes that Congress has an opportunity to improve the CFPB over the long term by converting the Bureau into a five-member, bipartisan commission that is subject to Congressional appropriations.
That’s why NTU has long supported proposals to reform the CFPB through the normal appropriations process and implement a bipartisan commission structure similar to the FTC or FCC. These reasonable changes should garner bipartisan support - especially since whoever wins the 2020 presidential election will nominate a new successor to Ms. Kraninger. Doing so would ensure the CFPB's long-term stability, while isolating it from undue political influence so it can better execute its mission of protecting consumers.