US Supreme Court Lifts Limit On President's Ability To Fire Agency Directors In CFPB Case

The U.S. Supreme Court on Monday overturned part of a federal law that limited President Trump’s ability to fire the head of the Consumer Financial Protection Bureau without cause, ruling it violated the constitutional separation of powers but determined the agency, itself, is legal.

The justices agreed the issue of the president’s ability to fire the CFPB’s director could be severed from the rest of the case, meaning the agency can continue to operate and its past cases do not need to be revisited.

“The president’s power to remove -- and thus supervise -- those who wield executive power on his behalf follows from the text of Article II, was settled by the First Congress, and was confirmed in” a 1926 landmark decision, Chief Justice John Roberts wrote in the majority opinion.

He added: “We therefore hold that the structure of the CFPB violates the separation of powers. We go on to hold 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.”

The 5-4 decision, in which Roberts sided with the four more conservative justices on the court, came in Seila Law v. Consumer Financial Protection Bureau, which was filed by a California law firm that refused to comply with a civil investigative demand. Seila Law provides debt-related legal services to clients.

The CFPB was the brainchild of Sen. Elizabeth Warren, D-Mass., in the wake of the Great Recession. It was part of the 2010 Dodd-Frank Act and was charged with protecting consumers from abuses by financial institutions. The law specifically prohibited firing its director without cause.

Warren hailed the decision on Twitter.

Warren was the agency’s first director.

Justices Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh joined with Roberts on the majority opinion.

Trump fired the interim director of the agency after Warren’s successor, Richard Cordray, resigned, placing Mick Mulvaney in the role. Mulvaney, who also heads the White House Budget Office, started dismantling the agency. Republicans consider it an example of government overreach.

Since it was established, the agency has returned nearly $12 billion to some 29 million consumers.