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Supreme Court rules structure of CFPB is unconstitutional

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Washington — The Supreme Court ruled Monday the structure of the Consumer Financial Protection Bureau (CFPB), a consumer watchdog that was the brainchild of Democratic Senator Elizabeth Warren, is unconstitutional, but stopped short of dismantling the agency.

Writing for the majority, Chief Justice John Roberts wrote "the structure of the CFPB violates the separation of powers."

"The agency may therefore continue to operate, but its director, in light of our decision, must be removable by the president at will," Roberts wrote for the 5-4 court.

The court ruled along ideological lines that the structure of the CFPB violates the Constitution. The high court also found by a vote of 7-2 that the provision of the law dictating the director's removal can be struck down without invalidating the entirety of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the consumer agency.

With its ruling, the high court handed a victory to conservatives on Capitol Hill who have long taken aim at the consumer watchdog agency, which was created in 2010 in the wake of the financial crisis. 

Read the court's opinion here

But Warren said in a series of tweets in the wake of the Supreme Court's ruling that the "CFPB is here to stay."

"Even after today's ruling, the CFPB is still an independent agency. The director of that agency still works for the American people. Not Donald Trump. Not Congress. Not the banking industry. Nothing in the Supreme Court ruling changes that," she said.

Kathy Kraninger, the director of the CFPB, said the ruling "finally brings certainty to the operations of the bureau."

"We will continue with our important mission of protecting consumers with no question that we are fully accountable to the president," she said in a statement.

The Justice Department under President Trump and the agency's director argued against the structure of the CFPB, saying it concluded the "statutory restriction on the president's authority to remove the director violates" the Constitution. 

Under Dodd-Frank, which was signed into law by President Barack Obama, the CFPB is helmed by a single director who can only be removed by the president for "inefficiency, neglect of duty or malfeasance in office." But Republicans and the Trump administration argued that the protections afforded to the agency's director, who serves a five-year term, violated the separation of powers.

The case before the Supreme Court was brought by a California law firm, Seila Law. The CFPB sought information and documents from the firm as part of an investigation into whether it violated federal consumer-financial law.

But Seila asked the CFPB to put its request for records aside, arguing it was invalid because the watchdog agency's structure was unconstitutional. The 9th U.S. Circuit Court of Appeals sided with the CFPB, ruling its structure comports with the Constitution.

Several other cases challenging the constitutionality of the CFPB made their way through the federal courts before the 9th Circuit's ruling. In one of those cases, before the U.S. Court of Appeals for the District of Columbia Circuit, then-Judge Brett Kavanaugh, now a justice on the Supreme Court, dissented from an en banc decision in favor of the CFPB.

The CFPB was created to protect consumers from unfair practices and can take legal action against entities that violated federal consumer financial laws. But under the Trump administration, the CFPB has scaled back its enforcement efforts. 

After Richard Cordray, its first director, left the bureau to run for governor of Ohio, Mr. Trump selected Mick Mulvaney, who was also leading the Office of Management and Budget, to serve as its acting director. The president then nominated Kraninger to permanently helm the CFPB, and she was narrowly confirmed by the Senate in December 2018.

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