What’s at Stake in the Constitutionality CFPB Case

As the The U.S. Supreme Court prepares to hear the appeal of a California law firm that argues the Consumer Financial Protection Bureau (CFPB) is unconstitutionally structured, American Enterprise Institute Senior Fellow Peter J. Wallison argues that there is more at stake than just the constitutionality of the Bureau.

On Real Clear Politics, Wallison argues that this CFPB case is an example of Congress enacting “broadly  phrased laws, essentially delegating the key legislative choices to administrative agencies and violating the Framers’ constitutional plan of separation.”

Additionally, he states that the Dodd-Frank Act is another “dangerous step.”

“First, it gives the CFPB’s director a five-year term of office, protected from removal by the president other than for ‘inefficiency, neglect of duty, or malfeasance,’” Wallison said. “This places the director outside the control of the president, whose ability to pursue the policies he was elected to implement depends crucially on the ability to remove and replace the senior officials of executive agencies.”

This means, according to Wallison, that this case is a prime opportunity to make a clearer separation of powers.

The law firm named in the case, Seila Law, alleges that the structure of the agency grants too much power to its director. According to court papers, given the CFPB’s broad law enforcement powers, the fact that the president may only remove the director of the CFPB “for inefficiency, neglect of duty, or malfeasance in office” is unconstitutional. As Wallison says, “the president has the power through the appointment and removal of executive officials to carry out the policies he was elected to pursue.” In May, the CFPB beat Seila Law before a panel of the 9th U.S. Circuit Court of Appeals.

“Seila Law contends that an agency with the CFPB’s broad law-enforcement powers may not be headed by a single Director removable by the President only for cause. That argument is not without force,” Circuit Judge Paul Watford wrote for the court.