The U.S Supreme Court invalidated the limitation of the powers of the President to fire the Director of the Consumer Financial Protection Bureau (CFPB) in Seila Law LLC v. Consumer Financial Protection Bureau decision. Chief Justice John Roberts wrote for the majority “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 Supreme Court’s finding of severability means that the President’s ability to fire the CFPB Director does not doom the agency’s entire existence, stating “The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.”
As noted, the Court confirmed the constitutionality of the CFPB itself, thereby upholding the enforcement action taken by the agency against the defendant Seila Law LLP.
In what may foreshadow further implications of this ruling, the majority opinion also cited the recent 5th Circuit decision which held that the structure of the Federal Housing Finance Agency (FHFA) was unconstitutional, writing that “[FHFA’s] single-Director structure is a source of ongoing controversy. Indeed, it was recently held unconstitutional by the Fifth Circuit, sitting en banc.”
SFA is actively investigating ramifications of today’s decision on regulatory agencies, ongoing rulemakings, and the impact on financial markets.