The Supreme Court has agreed to take up a dispute over the constitutionality of the Consumer Financial Protection Bureau in a case that could dramatically scale back the agency’s authority to police financial markets or eliminate it altogether.
The court said Friday it will hear a challenge from a California-based law firm that argues the CFPB, the brainchild of Sen. Elizabeth Warren, a Massachusetts Democrat, is unconstitutionally structured.
Opponents of the CFPB, created in 2010, argue that its structure violates the separation of powers, as Congress gave it broad authority to regulate mortgages, credit cards, and other consumer products, and is helmed by a single director who can’t be removed by the president except for cause.
The court said it will also address whether the entirety of the law that created the CFPB, the Dodd-Frank Wall Street Reform and Consumer Protection Act that re-ordered the financial regulatory system, should be struck down.
The Trump administration said in a filing with the Supreme Court it concluded the “statutory restriction on the president’s authority to remove the director violates” the Constitution, and “the director of the bureau has since reached the same conclusion.”
Trump tapped Kathy Kraninger to replace Mick Mulvaney, the acting CFPB director, last year.
Congress set up the CFPB as part of the Dodd-Frank financial reform package, and its director is appointed by the president and confirmed by the Senate. The director serves a term of five years.
Cases challenging the constitutionality of the agency have been weaving their way through the lower courts. In 2016, Justice Brett Kavanaugh, then a judge on the U.S. Court of Appeals for the District of Columbia Circuit, said in a ruling in a similar case the CFPB is a “gross departure from settled historical practice.”
The full D.C. Circuit ultimately upheld the constitutionality of the agency.
The justices will likely hear arguments in the case next year, with a decision coming by the end of June.
Warren, who proposed the agency’s creation, is currently a front-runner for the Democratic presidential nomination.
