Liberals and conservatives in Washington have spent the last decade arguing over the legality of the Consumer Financial Protection Bureau (CFPB). This week, the Supreme Court begins the process of deciding the issue.
The CFPB was created in 2010 as part of the Dodd-Frank Financial Reform Act. The agency was the brainchild of Elizabeth Warren, who at the time was a Harvard professor and later became a Democratic senator from Massachusetts.
The legislation established the agency as completely independent from Congress, getting its funding from the Federal Reserve. Its director serves a five-year term and can only be removed by the president for “inefficiency, neglect of duty, or malfeasance in office.”
In the beginning, consumer advocates praised the agency, saying it would be free of political pressure and would only serve the interests of consumers. The target was “abusive” financial services companies, especially those that were deemed to be predatory lenders.
Conservatives objected on constitutional grounds, saying the Constitution establishes the president as head of the executive branch. They argued that an agency not accountable to Congress or the president violates the founding document.
When the Trump administration came into office in 2017, the CFPB underwent a radical change. Its acting director was Mike Mulvaney, a former congressman who voted more than once to abolish the agency. In a remarkable report to Congress in 2018, Mulvaney asked lawmakers to limit the power of his agency, probably something that had never been done before.
“The Bureau is far too powerful, and with precious little oversight of its activities,” Mulvaney wrote in his report.
Supporters become critics
By and large, consumer advocates claimed the administration’s objection to the bureau had less to do with principles and more to do with defanging regulators, something the White House vigorously denied.
Even so, CFPB under the Trump administration has remained a constant target. Last month, the Center for Responsible Lending (CRL) criticized the agency, charging that a proposed rule would clear the way for debt collectors to collect “expired” debt.
“Nearly one-third of adults among the nation’s 71 million consumers with active credit files are aggressively pursued by debt collectors based on information that is often in error, incomplete, or so old that the statute of limitations has passed,” said CRL Policy Counsel Kiran Sidhu.
On Tuesday, the high court will begin hearing oral arguments in a suit charging the structure of the CFPB is unconstitutional. The agency is being represented by a court-appointed lawyer because the administration declined to offer a defense.