Richard Cordray was the first director of the Consumer Financial Protection Bureau. He is the author of “Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy.”
For six years, I served as the first director of the Consumer Financial Protection Bureau. In 2010, Congress determined that this important new agency should have a single leader, with independent tenure protections, to make the hard decisions about how best to protect consumers against big banks and financial companies.
Our aggressive work to protect people from being cheated and mistreated understandably aroused opposition from some of these powerful companies. And so, ever since, the financial industry has been peppering the bureau with various challenges to its constitutionality. Among them was the claim that a single director of an agency wielding so much power does not square with strong notions of presidential control over the executive branch of the government. Some courts accepted this claim; others rejected it. Eventually, the case found its way to the Supreme Court, and Monday, in Seila Law v. Consumer Financial Protection Bureau, the court issued a 5-to-4 ruling striking down the bureau’s leadership structure as unconstitutional.
On its face, that sounds like a major blow. The court’s holding that the agency was established in an unconstitutional manner might seem to jeopardize everything it does and all that it has ever done. Certainly, when the financial companies first began raising these claims, they did so with a desire to put the CFPB out of business once and for all.
But that is not the upshot of the decision. If anything, this ruling is a sheep that comes in wolf’s clothing. Although the court did invalidate the independent tenure of the CFPB’s single director, seven of the nine justices stopped right there and refused to go further. By carefully slicing off the tenure protections for the director, they left all other aspects of the agency in place. In fact, Chief Justice John G. Roberts Jr. pointedly noted that “the CFPB’s structure and duties remain fully operative without the offending tenure restriction.”
At least for the foreseeable future, this “losing” verdict represents a big victory for consumers, in three respects. First, this case was the last gasp for the CFPB’s opponents, who had hoped to dismember it through the courts. No tenable constitutional challenges remain to the bureau’s considerable authority. As no less an avowed critic than former acting director Mick Mulvaney has grudgingly conceded, the CFPB “is not going anywhere,” and it is “going to play an important role in government.”
Second, the constitutional challenges had repeatedly impeded the bureau’s enforcement work in many cases. Just as the agency’s lawyers were trying to focus the court on predatory or deceptive actions by certain companies, those companies would throw the constitutional flag to gum up the works. By raising these arguments, they secured delays that stretched for months or even years to prevent the courts from addressing their conduct. Now, with the constitutional issue definitively settled by the highest court in the land, those tactics will no longer be effective.
Third, and most ironically, the immediate effect of the court’s decision is to cut off protections for the one director currently affected by the case: President Trump’s appointee, Kathy Kraninger. Although these stones initially were thrown at me, in the hopes of ousting me or at least intimidating the CFPB into doing less for consumers, they now are landing on a different target. Kraninger had been confirmed for a five-year term lasting to December 2023. But after today’s ruling, she can be dismissed at any time — including Jan. 20, 2021, when a new president may take office. If that happens, the tenor of the agency’s work is sure to change once again, this time tipping back toward strongly protecting consumers and their families.
In the long run, the practical effects of the case are also likely to be limited: It means simply that each new president will likely appoint a new CFPB director, in much the same way he or she will appoint new Cabinet members. The broader question is whether this ruling will encourage further challenges from conservative academics trying to dismantle the independence of other federal agencies, such as the Federal Reserve or the Federal Communications Commission. Those more far-reaching arguments were vigorously presented in this case, but they fell far short of the mark, with only Justices Clarence Thomas and Neil M. Gorsuch taking the bait.
As with any type of fishing, doctrinal change at the Supreme Court requires immense patience. Perhaps in another decade or two, we will get more answers. We don’t have to wait, however, to grasp the good news that the justices delivered Monday for American consumers: The CFPB is here to stay.
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