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Supreme Court Appoints Former Solicitor General to Defend CFPB

The U.S. Supreme Court has appointed former U.S. Solicitor General Paul Clement to argue in support of the CFPB’s structure in the case of Seila Law LLC V. Consumer Protection Bureau. The U.S. Supreme Court agreed to hear the appeal of the California law firm that argues the Consumer Financial Protection Bureau is unconstitutionally structured, positioning the justices to settle longstanding questions surrounding the legitimacy of the independent agency.

In a brief [1], the CFPB suggested that the Supreme Court might want to appoint a “friend of the court” to defend the ruling by the U.S. Court of Appeals for the 9th Circuit rejecting the challenge to the CFPB’s structure.

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. 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.

Last year, in a split decision, a Washington appeals court has reversed a previous ruling, declaring the structure of the Consumer Financial Protection Bureau to be constitutional after all. The Court of Appeals for the District of Columbia Circuit ruled in January 2018 that the CFPB's structure is constitutional and that the director of the agency can only be fired by the president for “inefficiency, neglect of duty, or malfeasance in office.”

The court's ruling read, in part, "None of the theories advanced by PHH supports its claim that the CFPB is different in kind from the other independent agencies and, in particular, traditional independent financial regulators."