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SCOTUS Rules that CFPB Director Can Be Fired by President but Is Otherwise Constitutional

The logo of the Consumer Financial Protection Bureau

While this is not the Supreme Court ruling that everybody in the industry is waiting to hear, the Court did hand down a ruling Monday that could have potential consequences for telemarketers. In Seila Law LLC v. Consumer Financial Protection Bureau, the Supreme Court ruled that the president has the power to fire the Director of the Consumer Financial Protection Bureau (CFPB), but otherwise affirmed the constitutionality of the independent regulatory agency.

Congress created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 in response to the 2008 financial crisis. The organization was given oversight of a number of statutes—including the Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), and Truth in Lending Act (TILA)—as well as wide ranging regulatory, investigatory, and adjuratory powers over much of the financial industry. The bill also called for the CFPB to be a particularly independent regulatory agency. It would be headed by a single director, confirmed by the Senate to serve a single, five year term who could only be removed by the President for “inefficiency, neglect of duty, or malfeasance in office.” This last provision is the central point of dispute in Seila v. CFPB.

In 2017, the CFPB instigated an investigation into the plaintiff, a law firm that specializes in debt-related cases. Seila sued to have the investigation stopped based on the argument that the CFPB’s structure of having a single director who could not be fired at will was a violation of the separation of powers as proscribed by the US Constitution. The Supreme Court agreed that this structure was unconstitutional but rather than invalidating the CFPB entirely, as the plaintiff sought, they found that the remedy was to sever the portion of the statute that creates that structure. Writing for the majority, Chief Justice John Roberts explains 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.”

It remains to be seen if this decision will have consequences for other federal agencies with similar leadership structures, such as the Social Security Administration.With regards to the telemarketing industry, the most important aspect of this decision is it essentially ensures that the CFPB will continue to exist, albeit as a less independent entity. While not as important as the Federal Communications Commission (FCC) or Federal Trade Commission (FTC), the CFPB regulates significant aspects of the telemarketing industry, particularly with regards to debt collection.