Politics

The head of the CFPB now believes that the financial regulator is unconstitutionally structured

Key Points
  • The head of the Consumer Financial Protection Bureau now believes that the financial regulator she leads is unconstitutionally structured. 
  • CFPB Director Kathleen Kraninger notified senior lawmakers on Tuesday that the bureau had determined that the agency gave her too much independence.
  • She noted that the Department of Justice, on behalf of the bureau, had formally filed a brief with the Supreme Court including her new position. 
Signage is displayed inside the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., U.S., on Monday, March 4, 2019.
Andrew Harrer | Bloomberg | Getty Images

The head of the Consumer Financial Protection Bureau now believes that the financial regulator she leads is unconstitutionally structured.

CFPB Director Kathleen Kraninger notified senior lawmakers on Tuesday that the bureau had determined that the law that established the agency in the wake of the financial crisis gave her too much independence. That brings her position in line with the one adopted by the Department of Justice in March 2017.

"Mindful of the Bureau's role as an Executive agency within the Executive Branch [...] I have decided that the Bureau should adopt the Department of Justice's view," Kraninger wrote in letters to House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Mitch McConnell, R-Ky.

She noted that the Department of Justice, on behalf of the bureau, had formally filed a brief with the Supreme Court including her new position.

While the Justice Department had earlier said the CFPB was unconstitutional, the bureau had continued to defend itself against court challenges. In the Supreme Court brief, Solicitor General Noel Francisco said, "the Director has reconsidered that position."

Kraninger assumed leadership of the CFPB in late 2018 after facing heavy scrutiny from consumer advocates including Sen. Elizabeth Warren, a Democratic presidential contender. Kraninger said during her nomination process that she believed "the ultimate question of the constitutionality of the Bureau's structure is one for Congress or the courts to resolve."

The case the brief was filed in connection with is Seila Law v. CFPB. Seila Law, a California law firm, is challenging the single-director structure of the bureau. Unlike the heads of some other agencies, the director of the CFPB can be removed by the president only for cause.

In its brief with the Supreme Court, the Justice Department urged the justices to take up the case and find the structure of the agency unconstitutional. But, it said, it would be possible to limit the power of the agency's director without scrapping it altogether.

Kraninger wrote in her letter to lawmakers that even if the court finds that the structure of the agency is unconstitutional, it should remain "fully operative."

"My determination that the for-cause removal provision is unconstitutional does not affect my commitment to fulfilling the Bureau's statutory responsibilities," she added.

Though the Justice Department had previously said it determined the CFPB to be unconstitutional, this is the first time it has asked the top court to review the matter in a particular case.

The CFPB regulates financial companies such as banks and credit unions. As of 2017, the bureau said it had returned $12 billion in financial relief to consumers. Its enforcement actions have been curtailed under President Donald Trump. 

Warren, who originally proposed the CFPB, did not immediately respond to a request for comment.

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