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Supreme Court Hears Case That Could Weaken Consumer Financial Protection Bureau


The Consumer Financial Protection Bureau was created with the aim of protecting consumers from abuses in the banking and financial services industry. Today at the Supreme Court, the court's conservative justices voiced skepticism about the independent agency. NPR legal affairs correspondent Nina Totenberg has more.

NINA TOTENBERG, BYLINE: In the aftermath of the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau. Lodged in the offices of the Federal Reserve Board, the Bureau has enacted new rules to safeguard the mortgage market and protect consumers from abusive and misleading practices, involving everything from credit cards to debt relief.

The CFPB is headed by a single director with a five-year term. And in order to ensure that the director is independent, the law bars the president from firing him for any reason except for malfeasance, inefficiency or neglect of duty. That independence is being challenged as unconstitutional by a firm that's being investigated for misleading practices and by the Trump administration. Both claim that such limits on a president's power to fire is unconstitutional. And they're asking the Supreme Court, if necessary, to strike down a long line of decisions going back almost a century, decisions that uphold the structure of numerous independent regulatory agencies.

First up to the lectern this morning was lawyer Kannon Shanmugam. Never before in American history, he said, has Congress given so much executive power to a single individual who does not answer to the president. Justice Sotomayor - you said that no other agency has this single director framework, but there are at least two, including the Social Security Administration, which affects virtually every American. Shanmugam replied that the Social Security Administration poses no threat to individual liberty. Justice Ginsburg - whose liberty are we speaking of? What about consumers? Congress passed this law so that consumers would be better protected from financial fraud. Justice Kagan - ours is a Constitution that does not say anything about removal. Removal is like a nuclear bomb. Why not leave it to the political branches to establish the terms for removal?

With the Trump administration joining the attack on the CFPB structure, the Supreme Court appointed lawyer Paul Clement to defend the existing law. As he put it, shortly after getting that assignment...


PAUL CLEMENT: The issue in this case is like the thread on the sweater, that if you start tugging on it, and you tug on it hard enough, potentially, the whole sweater comes undone. And the sweater here really is the entirety of the whole alphabet soup of agencies.

TOTENBERG: Agencies created to protect regulators from being fired at will by the president. Clement took a beating from the court's conservatives, especially Justice Kavanaugh, who, as a lower court judge in a different case, said he thought the structure of the CFPB is unconstitutional.

Addressing Clement today, Kavanaugh said if you win, it's really the next president who will suffer the consequences because the head of the CFPB appointed by the current president will be there until 2023. Clement replied to this and other similar questions by saying that, ultimately, this is Congress' call and has been for a hundred years. The Federal Reserve Board of Governors, he noted, are appointed for staggered 14-year terms. After all, he said, we wouldn't want the president fiddling with interest rates right before an election.

Similarly, in the current situation, where people are trying to make a political football out of a pandemic, Congress, he said, might decide that the head of the CDC should be protected from removal except for misconduct because that'll make sure that people get good advice not political advice. Still, at the end of the day, there appeared to be five conservative justices unwilling to advance that kind of independence and four liberal justices with an opposite view.

Nina Totenberg, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Nina Totenberg is NPR's award-winning legal affairs correspondent. Her reports air regularly on NPR's critically acclaimed newsmagazines All Things Considered, Morning Edition, and Weekend Edition.