The court said that a key 1935 decision “permitted Congress to give for-cause removal protection to a multimember body of experts who were balanced along partisan lines” but did not extend that authority to a single director vested with executive power.
The decision could have significant implications for the future of the similarly structured Federal Housing Finance Agency, the overseer of mortgage giants Fannie Mae and Freddie Mac. Like the head of the CFPB, the FHFA director is appointed to a five-year term and can only be removed for cause.
From the day it opened its doors nine years ago, the CFPB — the brainchild of Sen. Elizabeth Warren (D-Mass.), then a law professor at Harvard — was polarizing, with Democrats casting it as a long-overdue cop on the beat for consumers after the 2008 financial crisis and Republicans slamming the agency as an example of regulatory overreach.
Congress established the bureau as part of the landmark 2010 Dodd-Frank financial overhaul, mandating that it be led by a single director appointed to a five-year term who could only be fired for “inefficiency, neglect of duty or malfeasance in office” in a bid to insulate the agency from political interference. In a similar move, the authors of Dodd-Frank also chose to fund the CFPB through the Federal Reserve, rather than the congressional appropriations process.
Yet where Democrats see independence, Republicans see a lack of accountability. Republicans have long sought to overhaul the agency’s single-director structure and replace it with a bipartisan commission akin to the leadership of other financial regulators. GOP attacks have abated since Trump put his own people in charge of the bureau, but the leadership issue has never been resolved.