Supreme Court Opinion Allows CFPB to Keep Operating; President Can Remove the Director

Codes and Standards

In a ruling that will avoid disruptions to the nation’s mortgage and lending markets, the Supreme Court ruled today that the Consumer Financial Protection Bureau (CFPB) can continue operating but the president has the authority to remove the director “at will.”

In a decision written by Chief Justice John Roberts, the court held that the CFPB’s structure – which includes a single director that can only be removed for cause by the president – is unconstitutional. However, the court also held that the remedy to this constitutional issue is to sever the for-cause provision from the statute. Thus, the CFPB remains intact and the director can be removed at will by the president.

The ruling stated: “…[T]here are compelling reasons not to extend [prior] precedents to the novel context of an independent agency led by a single Director. Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control. 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.”

NAHB joined an amicus brief with the Mortgage Bankers Association and National Association of Realtors that contended if the Supreme Court found CFPB’s structure unconstitutional, it should sever the “for-cause” provision in order to avoid massive disruption in the mortgage and lending markets that would result if CFPB were disbanded.

The Supreme Court’s ruling today prevents this disruption by preserving the agency while addressing the unconstitutional provision.

A very similar case was brought against the Federal Housing Finance Agency (FHFA) in the Fifth Circuit. Last year, that court held, in an en banc (a case heard before all the judges) opinion, that the FHFA structure was likewise unconstitutional and could be remedied similarly by severing the for-cause provision from the statute. Both parties in this case (Collins v. Mnuchin) sought the Supreme Court’s review, and those petitions are still pending.

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