by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The Supreme Court will hear arguments on Tuesday in a case over whether the Consumer Financial Protection Bureau, the regulatory agency established in the wake of the 2008 financial crisis, is constitutionally structured.
The case, key to the future of the CFPB, could also have broad implications on other independent federal agencies, according to experts. A decision is expected by the end of June.
The dispute turns on whether the CFPB’s director is given too much independence. Under the 2010 Dodd-Frank Act, which established the regulator, the agency is headed by a single director who may be removed by the president from his or her five-year term only for “inefficiency, neglect of duty, or malfeasance in office.”
The CFPB also sidesteps the traditional congressional appropriations process, instead getting most of its funding from the Federal Reserve system. The funding mechanism is similar to that of other financial regulators like the Comptroller of the Currency and the Federal Deposit Insurance Corp.
The bureau, which was envisioned by Sen. Elizabeth Warren when she was a professor at Harvard Law School, is designed to rein in abusive practices in consumer credit markets such as home mortgages and credit cards. It returned $12 billion to consumers between 2011 and 2017, but largely stopped pursuing enforcement actions under President Donald Trump.