Multi-Member Commissions
A San Francisco-based federal appeals court had upheld the agency’s structure, relying on a 1935 Supreme Court decision that let Congress insulate the five members of the Federal Trade Commission from being fired in the absence of misconduct.
Roberts said the CFPB is different from the FTC because it has a single director, rather than a multi-member commission. FTC commissioners serve seven-year terms that expire at different times, and no more than three members can be of the same political party.
Roberts said multi-member commissions were an exception to “the president’s unrestricted removal power” with regard to top government officials.
Dissenting Justice Elena Kagan said the distinction between single-director agencies and multi-member commissions was constitutionally meaningless. She said Roberts had “gerrymandered” his test so as to invalidate the CFPB’s structure.
“Congress and the president established the CFPB to address financial practices that had brought on a devastating recession, and could do so again,” Kagan wrote. “Today’s decision wipes out a feature of that agency its creators thought fundamental to its mission -- a measure of independence from political pressure.”
Sales Pitches
Roberts said the removal restrictions could be severed from the rest of the Dodd-Frank Act, leaving the CFPB otherwise intact.
“There is nothing in the text or history of the Dodd-Frank Act that demonstrates Congress would have preferred no CFPB to a CFPB supervised by the president,” Roberts wrote.
The case before the court involved Seila Law, a California firm fighting a CFPB demand for information about its sales pitches to indebted consumers. The CFPB is investigating Seila’s possible role in a scheme that has already produced a $173 million court judgment against another firm, Morgan Drexen Inc.
The Supreme Court kicked the case back to a federal appeals court to determine whether the CFPB demand was valid.
The case is Seila Law v. CFPB, 19-7.
This article was provided by Bloomberg News.