The Supreme Court ruled late last month that the leadership of the Consumer Financial Protection Bureau must be accountable to the president. Run by a single director who could previously be removed only for “inefficiency, neglect, or malfeasance,” the head of the bureau held all the cards.
This degree of power was nearly unprecedented. In fact, the Court found that only the director of the Federal Housing Finance Agency had ever enjoyed the same level of autonomy as the director of the CFPB. As Chief Justice John Roberts wrote for the majority, the CFPB director’s unaccountability “lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control.”
This decision was a win when it comes to the separation of powers, though many conservatives would have preferred to see the Court dismantle the CFPB altogether. I share some of their concerns – the CFPB has a big hammer, and some feel it has often wielded its power to do more harm than good. But since the Court declined to strike down the CFPB altogether, Congress should take additional steps to limit the authority of its leadership.
The CFPB’s leadership structure was originally intended to be modeled on that of other independent federal agencies, but this got lost somewhere in the Dodd-Frank Act’s roughly 2,300 pages. Instead of a bipartisan commission, such as those of nearly every other independent agency, Congress created an agency with a single director. Sen. Elizabeth Warren (D-Mass.), who first had the idea for an independent financial regulatory agency in 2007 while she was a professor, envisioned a bipartisan commission being in charge. The Obama administration’s 2009 proposal for the agency also suggested that it be led by a commission.
Sen. Richard Shelby, then the ranking member of the Senate Banking Committee, concurred. In 2011, he joined every other Republican senator in a letter to President Obama. The senators wrote that they could not vote to confirm a single nominee to lead the CFPB and urged him to return to his administration’s original idea of a multi-member panel. When Sens. Warren and Shelby agree on something, it cannot be merely a partisan scheme.
The Supreme Court’s recent decision in Seila Law v. CFPB, then, addressed only part of the issue. The extraordinary autonomy of the director was plainly unconstitutional, but the Court left the single-directorship structure intact. This may be a further question of constitutionality, depending on your point of view. But regardless of one’s answer, Congress can, and should, act to bring the CFPB’s leadership in line with that of other independent agencies.
Since 2013, I have had a bill that would replace the CFPB’s leadership structure with a bipartisan Financial Product Safety Commission. Each of its five members would be appointed by the president and confirmed by the Senate, and commissioners would serve five-year terms, just as the current director does. This would transfer the power currently held by a single individual to a multi-member board, which will have to come to a consensus before making decisions that are currently made unilaterally. As Shelby has said, “The SEC and FDIC are led by boards. Why should one person have sweeping powers over the economy?”
Beyond questions of constitutionality and prudence, the CFPB’s current single-directorship model means that the agency’s extensive regulatory, investigative, and enforcement actions are subject to change with every presidential election, creating a whiplash effect. The agency is simply too powerful for this to be sustainable: Home finance, student loans, auto loans, credit cards and banking practices all fall under its jurisdiction. America’s businesses, especially those not able to hire an army of lawyers to help them comply with rules that change every four years, need more stability than the CFPB’s current leadership structure gives them.
Consumers and the regulated community should not be at the whim of whichever party happens to control the White House. A bipartisan commission of experts would provide a more consistent approach to the CFPB’s consumer protection mission.
Congress botched the CFPB’s leadership structure in 2010, but it can fix it now. I hope my colleagues in Congress will join me in reforming the CFPB into the independent agency it should have been in the first place.
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