Early next year, the U.S. Supreme Court will hear oral arguments in Seila Law v. CFPB, a case that challenges the constitutionality of the Consumer Financial Protection Bureau, the regulatory agency created by the Dodd-Frank Act in 2010 that oversees consumer financial products and services.

The suit argues that the provision of the law that allows the president of the United States to remove the CFPB director only for cause (rather than at will) violates the constitutional separation of powers (the idea that the U.S. Constitution divides the different functions of government among the executive, judicial and legislative branches).

The Trump administration recommended the high court take on the case in a brief filed in September. “The structure of the Bureau, including the for-cause restriction on the removal of its single director, violates the Constitution’s separation of powers,” the brief reads.

If the justices agree, it could have serious repercussions on the authority of the agency, which Republicans have criticized as having too much authority and too little oversight. Such a ruling could potentially unravel everything the CFPB has done since its creation.

But Mark Dabertin, an attorney in law firm Pepper Hamilton’s Financial Services Practice Group, warns that the current structure “allows the incumbent Director to exercise a degree of independence that would be lost if the president could replace the Director at will.” In that case, he said, “the CFPB would likely be viewed as purely political and its actions would constantly be at risk of being undone.” 

We know where Supreme Court Justice Brett Kavanaugh stands. When he was a judge on the U.S. Court of Appeals for the District of Columbia Circuit in 2016, he authored a majority panel opinion in PHH Corp v. CFPB declaring the agency unconstitutional. That decision was ultimately overturned by the full court in 2018.

The CFPB has argued that the provision that limits the president’s ability to remove the director can be separated from the rest of the Dodd-Frank Act, which would enable the court to rule the provision unconstitutional without invalidating the entire bureau.

It’s up to the Supreme Court now.

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