The U.S. Supreme Court ruled on Monday that President Donald Trump can now fire the head of a federal consumer watchdog without limits. The decision came after the justices concluded the agency's structure violated the Constitution.
The 5-4 ruling could open the Consumer Financial Protection Bureau (CFPB) to politicization. The decision may also turn the agency's director into something resembling a president's cabinet member.
The court's five conservative justices, led by Chief Justice John G. Roberts, held the majority of the votes. In a written statement, Roberts claimed that the C.F.P.B. director holds broad authority over the U.S. economy despite having no boss or peers to report to.
While the ruling allows the president to remove the director at will, the agency may continue to set rules, launch investigations, and enforce actions without major interruptions.
The Response to the Ruling
Kathy Kraninger, the current director of the consumer watchdog, said the ruling brought certainty to its mission of protecting consumers, while being held fully accountable to the president.
The Trump administration called the decision a significant victory, noting that government officials should be held accountable to the United States' residents, the Wall Street Journal reported.
Republicans celebrated the verdict. However, they believed that more should be done to hold the CFPB accountable such as making the agency's funding subject for approval and giving it a board of directors.
Richard Hunt, president of the Consumer Bankers Association, said the recent ruling could lead to radical shifts in the financial services industry with each administration. He called on Congress to create a bipartisan commission.
Establishing the Agency
The CFPB is the brainchild of Elizabeth Warren, a former Democratic presidential candidate. She first proposed the agency in 2007, suggesting the bureau may help regulate mortgages, student loans, and other financial services.
In 2010, then-President Barack Obama appointed the Harvard Law School professor as a special adviser. Her responsibilities include setting up the new agency. It was ruled that the president could only remove its director over inefficiency, neglect of duty, or malfeasance.
Warren was expected to become the watchdog group's first director, but Republicans widely opposed her nomination. In 2011, Obama named Richard Cordray as the bureau's deputy director, following its launch.
Before the previous administration established the CFPB, seven different federal agencies oversaw financial consumer issues. The Obama administration folded the various departments under the CFPB, giving it the autonomy to carry out the work, the PBS News reported.
According to the financial reform law, the federal agency holds regulatory powers as well as the authority to issue subpoenas and take legal action in federal court. It also has jurisdiction over financial institutions with assets worth $10 billion or more.
In a CFPB report, the agency said it provided over $12 billion to 29 million Americans, who became victims of misleading or predatory financial services such as student loans and credit card services. It also recorded creating new consumer protection rules for mortgages and payday loans.
