In an opinion written by Chief Justice Roberts, the Supreme Court held, 5-4, that the for-cause removal provision, which requires that the director of the CFPB be removable by the president only for “inefficiency, neglect of duty, or malfeasance in office” violates the separation of powers and is unconstitutional. The Court severed the provision but did not make any other changes to the CFPB.
The CFPB remains, but the Supreme Court ruled that the “for-cause removal” provision of the Consumer Financial Protection Act, which requires that the director of the CFPB be removable by the president only for “inefficiency, neglect of duty, or malfeasance in office” violates the separation of powers and is unconstitutional. In Seila Law v. CFPB, the Court severed the provision but did not make any other changes to the CFPB.
What did the Court decide?
In a 5-4 decision authored by Chief Justice John Roberts, the Court held that the CFPB director’s insulation from removal was unconstitutional. However, partly because of the severability clause in the CFPA, the Court held that the appropriate remedy was to sever the “for-cause removal” provision. The Court stated:
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.
How does this affect the CFPB?
With the director removable at will by the president, the leadership of the CFPB may follow changes in administration as a matter of course.
How does this affect my case, enforcement action, or investigation?
While there is no immediate practical effect, the impact of the decision on the ground will need to be litigated first in the lower courts. The Supreme Court vacated and remanded the Ninth Circuit’s decision, with instructions to determine whether the civil investigative demand at issue in Seila Law was validly ratified. The Court stated:
[W]hether and when the temporary involvement of an unconstitutionally insulated officer in an otherwise valid prosecution requires dismissal falls outside the questions presented, has not been fully briefed, and is best resolved by the lower courts in the first instance.
Presumably, Director Kathleen Kraninger, who is now removable at will by the president, could ratify the CFPB’s prior actions and attempt to correct issues related to the constitutionality of the Bureau. The Court has deferred assessing the viability of such ratification until it is reviewed by the lower courts.
We are continuing to review the decision and expect to have more to say as the situation develops.