The U.S. Supreme Court has ruled that the leadership structure of the Consumer Financial Protection Bureau is unconstitutional. Many see this as a big setback for the agency. It needn’t be. In fact, it could end up helping the bureau to survive.

Before the agency’s inception in 2010, the U.S. had no single regulator designed to ensure the safety of retail financial products and look out for ordinary consumers. The task fell to seven different bodies – from the Federal Reserve to the Department of Housing and Urban Development – that all had other priorities. The result was weak oversight and unduly dangerous products, including the subprime mortgages that contributed to the 2008 financial crisis.

Created as part of the post-crisis Dodd-Frank financial reform, the Consumer Financial Protection Bureau brought all the responsibility under one roof. It had broad authority to decide which financial products and institutions it would oversee, and to make and enforce rules. Formally housed in the Fed, it didn’t depend on congressional appropriations. And it had a single director appointed by the president for a five-year term, who could be fired only for “inefficiency, neglect of duty, or malfeasance in office.”

Rarely are federal entities with such powers so insulated from Congress and the president. Most are run either by a single person serving at the pleasure of the president, or by a commission of political appointees who can be removed only for cause (the Federal Trade Commission, for example). Democratic lawmakers intended this structure to shield the new agency from undue influence exercised by the companies it oversaw. Others saw this design as unconstitutional, because it suspended the checks and balances that prevent government overreach.

The bureau’s first director, Richard Cordray, used his authority well. The bureau extended its scrutiny to such crucial areas as credit reporting, debt collection and student loan servicing. It launched a public database of consumer complaints to make financial institutions more responsive. It simplified documents for mortgages and bank overdrafts. After public discussion, it issued a well-crafted rule to curb the more predatory aspects of payday lending. Its enforcement actions recovered almost $12 billion for wronged consumers.

The Trump administration then demonstrated that the bureau’s supposed independence was in fact quite fragile. After a brief battle for control with Cordray, the president installed acting Director Mick Mulvaney – who had famously called the agency a “sick, sad” joke. Mulvaney moved quickly to reverse the payday-lending rule, weaken the bureau’s fair lending and student-lending units, pull back on enforcement and slash the budget. He even changed the bureau’s mission statement. Mulvaney’s successor, Kathleen Kraninger, has largely maintained the same course.

In a split decision, the Supreme Court has ruled that, to preserve the separation of powers, the president must be able to remove the head of the Consumer Financial Protection Bureau at will. But the justices stopped short of declaring the entire bureau unconstitutional – disappointing many of the agency’s critics and rejecting the only legal argument they had for a complete shutdown. The next administration will be able to appoint a new director willing to pursue the bureau’s original mission.

Granted, if successive administrations keep changing the bureau’s direction, the result will be greater regulatory uncertainty. To remedy that, a structure similar to the FTC’s (with commissioners from both parties appointed to staggered terms to provide greater continuity) might in the end be better. For now, what matters most is that the Consumer Financial Protection Bureau lives on and that, when properly led, it can continue to do its necessary work.


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