Corporate Accountability

Seila Law LLC v. Consumer Financial Protection Bureau

In Seila Law LLC v. Consumer Financial Protection Bureau, the Supreme Court considered a constitutional challenge to the leadership structure of the Consumer Financial Protection Bureau (CFPB). Since its creation, the CFPB has played a vital role in protecting consumers from harmful practices of the financial services industry and preventing the types of abuses that led to the 2008 financial meltdown.

Case Summary

The 2008 financial crisis decimated the American economy and caused millions of families to lose their homes. After months of evaluating the roots of this crisis and the types of reforms needed, Congress concluded that a major culprit was the failure of a fragmented and unaccountable consumer financial protection regime to safeguard homeowners from reckless financial products. To remedy this, Congress established a new agency, the Consumer Financial Protection Bureau (CFPB). In the Dodd-Frank Act, Congress structured the Bureau to be led by a single director, rather than a multimember commission, to avoid the gridlock and delay to which commissions are susceptible. And to insulate the Bureau from industry pressure and political interference, while ensuring accountability, Dodd-Frank provided that its director may be removed by the president for good cause (“inefficiency, neglect of duty, or malfeasance in office”), but not for policy disagreements alone.

Petitioner Seila Law LLC provides legal services in connection with consumer debt. As part of an investigation, the CFPB sought documents from Seila Law, which refused to comply—arguing that the Bureau’s structure is unconstitutional. A district court disagreed, and the U.S. Court of Appeals for the Ninth Circuit affirmed. Seila Law then petitioned the Supreme Court to review the decision. While this petition was pending, the CFPB changed its longstanding legal position and agreed with the Trump Administration’s Department of Justice that its own structure violates the separation of powers.

In January 2020, CAC filed an amici curiae brief on behalf of current and former members of Congress, including Ranking Member of the Senate Banking Committee Sherrod Brown, former Senator Christopher Dodd, and former Representative Barney Frank. In our brief, we first explained that the Constitution gives Congress broad power to shape the structure of federal agencies and to give their leaders a degree of independence from presidential control. As we showed, the Framers deliberately provided such flexibility to Congress so that future lawmakers could respond effectively to new and unforeseen national crises. Our brief then described how Congress exercised this discretion after the devastating financial crisis of 2008, making a considered decision that an independent CFPB led by a single director could best combat the types of consumer financial abuses that caused the near-collapse of the American economy. Finally, our brief demonstrated that Congress had every right to make this choice: the Supreme Court has long recognized that the heads of regulatory agencies may be shielded from removal at will, and the CFPB is materially indistinguishable from the agencies addressed in the Court’s prior decisions.

In a 5-4 decision split along ideological lines, the Supreme Court held that the CFPB’s leadership structure violates the separation of powers. Reinterpreting the meaning of longstanding precedent, the Court announced that its prior decisions approving the independence of regulatory commissions represented an “exception” to a constitutional rule under which the President has “unrestricted” power to fire federal officers at will. The Court said that it would not “extend” that exception to “the novel context” of a regulatory agency led by a single person rather than by a commission. The Court also held, however, that the provision in Dodd-Frank limiting the CFPB director’s removal could be severed from the rest of the statute. As a result, the CFPB can continue to operate, but its director is removable by the President at will.

In a rigorous dissent that echoes our brief, Justice Kagan explained that “the majority’s general rule does not exist” and that, instead, the Constitution gives Congress “wide leeway to limit the President’s removal power in the interest of enhancing independence from politics in regulatory bodies like the CFPB.” But “in second-guessing the political branches,” Justice Kagan continued, “the majority second-guesses as well the wisdom of the Framers,” binding the nation to “a static version of governance, incapable of responding to new conditions and challenges.”

Case Timeline

  • October 1, 2019

    CAC submits a letter to the Court indicating that if the case is granted, we intend to file an amicus brief and to request permission to participate in the oral argument

    U.S. Sup. Ct. Letter
  • October 18, 2019

    The Court grants the petition to hear the case

  • January 22, 2020

    CAC files an amici curiae brief

    U.S. Sup. Ct. Amici Curiae Brief
  • March 3, 2020

    The Supreme Court hears oral arguments

  • June 29, 2020

    The Supreme Court issues its decision