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The U.S. Supreme Court heard opening arguments Tuesday in Seila Law v. the Consumer Financial Protection Bureau (CFPB)—a case that could decide the constitutionality of the Bureau.
Kannon K. Shanmugan, attorney for Siela Law, who argues the CFPB was constructed against the U.S. constitution, had a clear message for the Supreme Court.
“The structure of the CFPB is unprecedented and unconstitutional,” Shanmugan said. “Never before in American history has Congress given so much executive power to a single individual who does not answer to the President.”
He added that by limiting the President’s ability to remove the CFPB’s director, Congress violated the “core presidential prerogatives” to exercise the executive power that laws are faithfully executed.
Shanmugan continued his opening remarks by saying the Solicitor General contends that the Supreme Court should rewrite the Dodd-Frank Act, giving the president the power to remove the CFPB’s director.
“But the constitutional question, in this case, arises in the context of a defense to an enforcement proceeding and not a facial challenge,” he said.
Shanmugan added that the government’s proposed fix would make the CFPB less independent than the agencies it was replacing.
“The Court should leave to Congress the quintessentially legislative task of deciding how to fix the CFPB's defective structure,” he said.
Supreme Court Justice Ruth Bader Ginsburg questioned how the makeup of the CFPB impacts Seila Law.
“I don't see how the composition of the Bureau affects your client since your client was—the adverse action is now attributable to someone who the President could remove at will,” Ginsburg said. “I don't see how differently you would be affected if the same thing occurred with the President having the power to remove at will.”
Gen. Noel J. Francisco, arguing on behalf of the CFPB, said that the President has the “unrestricted authority” to remove principal officers. “The President stands for election. The director of the CFPB does not,” Francisco said. “So, if the director is insulated from presidential oversight, then her exercises of executive power are insulated from democratic control.”
Ginsburg, however, questioned why a statute passed by Congress is being defended. Francisco said the statute “infringes upon the President’s own executive power.”
Current Democratic Presidential candidate Sen. Elizabeth Warren (D-Massachusetts) envisioned the CFPB during her time as a professor at Harvard Law School.
The CFPB was designed to rein in abusive practices in consumer credit marks, such as home mortgages and credit cards. CNBC states it returned $12 billion to consumers between 2011 and 2017 but stopped pursuing enforcement actions under President Donald Trump.
The CFPB has been the subject of several lawsuits, most recently by the California-based Seila Law. Seila Law alleges the CFPB’s insulation from presidential control is unconstitutional. The law firm challenged the agency after the CFPB targeted the firm 2017, CNBC states.
