Report: CFPB Will Not Defend Its Leadership Structure in Court

The Consumer Financial Protection Bureau will not defend the constitutionality of its leadership structure—with a single powerful director who can be removed by the president only “for cause,” not at will—according to letters sent by CFPB Director Kathy Kraninger and reported today by Politico.

The CFPB “has determined that the for-cause removal provision of the [Dodd-Frank Act] is unconstitutional,” Kraninger wrote to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell. “I have directed the Bureau’s attorneys to refrain from defending the for-cause removal provision in the lower courts.” Kraninger’s letters align the bureau’s legal position with that of the Department of Justice. “I believe it is in the Bureau’s interests to obtain a final resolution of this issue as soon as possible,” she added.

The move comes as a debt relief company called Seila Law asked the Supreme Court to hear its appeal of a 2017 civil investigative demand from the bureau, which Seila Law resisted on the grounds that the bureau’s structure was unconstitutional. The Ninth Circuit Court of Appeals upheld the CFPB’s structure, as did the full D.C. Circuit Court of Appeals in a separate 2018 ruling.

The American Bankers Association has long believed that a five-member, bipartisan commission—as originally envisioned in drafts of the Dodd-Frank Act—would balance the bureau’s needs for independence and accountability while broadening perspectives on rulemaking and enforcement and providing appropriate checks and balances.