Democrats are rallying around the consumer protection agency Congress created in the aftermath of the 2008 financial crisis as conservatives urge the Supreme Court to declare the regulator unconstitutional.
The Consumer Financial Protection Bureau (CFPB) could be on the chopping block as it faces a Supreme Court case over whether its unique structure violates the Constitution. Current and former Democratic lawmakers argued in court filings this week that the justices should reject the attacks from conservatives and free market groups against an agency they see as crucial to defending ordinary people from predatory financial firms.
“The independence of the Consumer Bureau is essential to curb the fraud and abuse that led up to the Great Recession and wreaked havoc on the economic strength and stability of countless American seniors, servicemembers, veterans, students and consumers across the country,” Speaker Nancy Pelosi (D-Calif.) said in a statement on Wednesday.
The agency was created as part of the 2010 Dodd-Frank bill that implemented financial sector reforms in response to the recession caused by risky subprime mortgage lending.
Many believed that a contributing factor to the crisis was a lack of oversight of the financial sector from regulators, who were seen as catering to industry interests.
In order to protect the CFPB’s independence, Congress implemented a unique regulatory structure for the agency. The CFPB is overseen by a single director, who is appointed by the president and confirmed by the Senate, and who can only be removed from office for “inefficiency, neglect of duty, or malfeasance in office,” unlike many executive branch officials who can be terminated at will.
The namesakes of the financial reform law —former Sen. Chris Dodd (D-Conn.) and former Rep. Barney Frank (D-Mass.) — joined a group of two dozen current and former Democratic lawmakers in submitting a court filing defending the CFPB.
“Congress carefully designed the CFPB so that it could best accomplish the critical tasks it was created to perform,” the group said in the amicus brief. “And the Bureau has been markedly successful in fulfilling its statutory mission. Among other accomplishments, it has promulgated new rules to end abusive mortgage practices and has recovered billions of dollars for defrauded consumers.”
Conservatives have long assailed the agency as an unaccountable regulator and argue that its structure is an unconstitutional restriction on the president’s executive powers. The Trump administration has refused to defend the CFPB in court against the lawsuit brought by a law firm that challenged an investigative subpoena on the grounds that the agency is unconstitutional.
Separate amicus briefs from the Democratic-controlled House and groups of current and former Democratic lawmakers this week urged the court to reject the conservative assault on the bureau. Pelosi’s lawyers argued in their filing that the case does not provide a proper venue for considering the agency’s legality, but maintained that its structure is fully consistent with the Constitution and Supreme Court precedence.
“In establishing the CFPB, Congress built upon its long history of creating, and this Court’s long history of upholding, independent agencies,” they wrote. “The CFPB performs the same functions independent regulators have long performed, and it does so under the same for-cause standard this Court first blessed 85 years ago. The CFPB’s single-director structure does not transform that traditional standard into an infringement on the President’s authority.”
Sens. Sheldon Whitehouse (D-R.I.), Richard Blumenthal (D-Conn.) and Mazie Hirono (D-Hawaii) argued in a separate filing that the legal opposition to the agency is driven by special interests funding dark money groups.
“This Court should not, under the guise of ‘liberty,’ and in defiance of both the Framers and settled precedent, impose an agency structure more susceptible to corporate influence,” they wrote. “Nor should it invalidate this critical agency, subjecting those defended by its proven expertise and track record to the whims of a malleable Congress. To do so would certainly be a ‘win’ for big, regulated industries flush with cash and cadres of paid lobbyists. But for the public, it would be a devastating disservice.”
The Supreme Court will hear arguments in the case on March 3.