Seila Law LLC v. Consumer Fin. Prot. Bureau

• Decision Date: 29 June 2020
• Docket Number: No. 19-7,19-7
• Citation: 207 L.Ed.2d 494,140 S.Ct. 2183
• Parties: SEILA LAW LLC, Petitioner v. CONSUMER FINANCIAL PROTECTION BUREAU
• Court: U.S. Supreme Court

140 S.Ct. 2183

207 L.Ed.2d 494

SEILA LAW LLC, Petitioner

v.CONSUMER FINANCIAL PROTECTION BUREAU

No. 19-7

Supreme Court of the United States.

Argued March 3, 2020

Decided June 29, 2020

Mr. Kannon K. Shanmugam, for Petitioner.

Mr. Solicitor General Noel J. Francisco for the respondent supporting vacatur, by Mr. Paul D. Clement, appointed by this Court, as amicus curiae in support of the judgment below, and by Mr. Douglas N. Letter for the United States House of Representatives as amicus curiae, by special leave of the Court

Thomas H. Bienert, Jr., Anthony Bisconti, Bienert Katzman PC, 903 Calle Amanecer, Suite 350, San Clemente, CA, Melina M. Meneguin Layerenza, Paul, Weiss, Rifkind,, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, NY, Kannon K. Shanmugam, Masha G. Hansford, William T. Marks, Joel S. Johnson, Laura E. Cox, Paul, Weiss, Rifkind, Wharton & Garrison LLP, 2001 K Street, N.W., Washington, DC, for Petitioner.

Noel J. Francisco, Solicitor General, Department of Justice, Washington, D.C., for Respondent.

CHIEF JUSTICE ROBERTS delivered the opinion of the Court with respect to Parts I, II, and III.

In the wake of the 2008 financial crisis, Congress established the Consumer Financial Protection Bureau (CFPB), an independent regulatory agency tasked with ensuring that consumer debt products are safe and transparent. In organizing the CFPB, Congress deviated from the structure of nearly every other independent administrative agency in our history. Instead of placing the agency under the leadership of a board with multiple members, Congress provided that the CFPB would be led by a single Director, who serves for a longer term than the President and cannot be removed by the President except for inefficiency, neglect, or malfeasance. The CFPB Director has no boss, peers, or voters to report to. Yet the Director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U. S. economy. The question before us is whether this arrangement violates the Constitution's separation of powers.

Under our Constitution, the "executive Power"—all of it—is "vested in a President," who must "take Care that the Laws be faithfully executed." Art. II, § 1, cl. 1 ; id. , § 3. Because no single person could fulfill that responsibility alone, the Framers expected that the President would rely on subordinate officers for assistance. Ten years ago, in Free Enterprise Fund v. Public Company Accounting Oversight Bd. , 561 U.S. 477, 130 S.Ct. 3138, 177 L.Ed.2d 706 (2010), we reiterated that, "as a general matter," the Constitution gives the President "the authority to remove those who assist him in carrying out his duties," id. , at 513–514, 130 S.Ct. 3138. "Without such power, the President could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else." Id. , at 514, 130 S.Ct. 3138.

The President's power to remove—and thus supervise—those who wield executive power on his behalf follows from the text of Article II, was settled by the First Congress, and was confirmed in the landmark decision Myers v. United States , 272 U.S. 52, 47 S.Ct. 21, 71 L.Ed. 160 (1926). Our precedents have recognized only two exceptions to the President's unrestricted removal power. In Humphrey's Executor v. United States , 295 U.S. 602, 55 S.Ct. 869, 79 L.Ed. 1611 (1935), we held that Congress could create expert agencies led by a group of principal officers removable by the President only for good cause. And in United States v. Perkins , 116 U.S. 483, 6 S.Ct. 449, 29 L.Ed. 700 (1886), and Morrison v. Olson , 487 U.S. 654, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), we held that Congress could provide tenure protections to certain inferior officers with narrowly defined duties.

We are now asked to extend these precedents to a new configuration: an independent agency that wields significant executive power and is run by a single individual who cannot be removed by the President unless certain statutory criteria are met. We decline to take that step. While we need not and do not revisit our prior decisions allowing certain limitations on the President's removal power, there are compelling reasons not to extend those precedents to the novel context of an independent agency led by a single Director. Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control.

We therefore hold that the structure of the CFPB violates the separation of powers. We go on to hold that the CFPB Director's removal protection is severable from the other statutory provisions bearing on the CFPB's authority. The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.

I

A

In the summer of 2007, then-Professor Elizabeth Warren called for the creation of a new, independent federal agency focused on regulating consumer financial products. Warren, Unsafe at Any Rate, Democracy (Summer 2007). Professor Warren believed the financial products marketed to ordinary American households—credit cards, student loans, mortgages, and the like—had grown increasingly unsafe due to a "regulatory jumble" that paid too much attention to banks and too little to consumers. Ibid. To remedy the lack of "coherent, consumer-oriented" financial regulation, she proposed "concentrat[ing] the review of financial products in a single location"—an independent agency modeled after the multimember Consumer Product Safety Commission. Ibid.

That proposal soon met its moment. Within months of Professor Warren's writing, the subprime mortgage market collapsed, precipitating a financial crisis that wiped out over $10 trillion in American household wealth and cost millions of Americans their jobs, their retirements, and their homes. In the aftermath, the Obama administration embraced Professor Warren's recommendation. Through the Treasury Department, the administration encouraged Congress to establish an agency with a mandate to ensure that "consumer protection regulations" in the financial sector "are written fairly and enforced vigorously." Dept. of Treasury, Financial Regulatory Reform: A New Foundation 55 (2009). Like Professor Warren, the administration envisioned a traditional independent agency, run by a multimember board with a "diverse set of viewpoints and experiences." Id. , at 58.

In 2010, Congress acted on these proposals and created the Consumer Financial Protection Bureau (CFPB) as an independent financial regulator within the Federal Reserve System. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), 124 Stat. 1376. Congress tasked the CFPB with "implement[ing]" and "enforc[ing]" a large body of financial consumer protection laws to "ensur[e] that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive." 12 U. S. C. § 5511(a). Congress transferred the administration of 18 existing federal statutes to the CFPB, including the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Truth in Lending Act. See §§ 5512(a), 5481(12), (14). In addition, Congress enacted a new prohibition on "any unfair, deceptive, or abusive act or practice" by certain participants in the consumer-finance sector. § 5536(a)(1)(B). Congress authorized the CFPB to implement that broad standard (and the 18 pre-existing statutes placed under the agency's purview) through binding regulations. §§ 5531(a)–(b), 5581(a)(1)(A), (b).

Congress also vested the CFPB with potent enforcement powers. The agency has the authority to conduct investigations, issue subpoenas and civil investigative demands, initiate administrative adjudications, and prosecute civil actions in federal court. §§ 5562, 5564(a), (f). To remedy violations of federal consumer financial law, the CFPB may seek restitution, disgorgement, and injunctive relief, as well as civil penalties of up to $1,000,000 (inflation adjusted) for each day that a violation occurs. §§ 5565(a), (c)(2); 12 CFR § 1083.1(a), Table (2019). Since its inception, the CFPB has obtained over $11 billion in relief for over 25 million consumers, including a $1 billion penalty against a single bank in 2018. See CFPB, Financial Report of the Consumer Financial Protection Bureau, Fiscal Year 2015, p. 3; CFPB, Bureau of Consumer Financial Protection Announces Settlement With Wells Fargo for Auto-Loan Administration and Mortgage Practices (Apr. 20, 2018).

The CFPB's rulemaking and enforcement powers are coupled with extensive adjudicatory authority. The agency may conduct administrative proceedings to "ensure or enforce compliance with" the statutes and regulations it administers. 12 U. S. C. § 5563(a). When the CFPB acts as an adjudicator, it has "jurisdiction to grant any appropriate legal or equitable relief." § 5565(a)(1). The "hearing officer" who presides over the proceedings may issue subpoenas, order depositions, and resolve any motions filed by the parties. 12 CFR § 1081.104(b). At the close of the proceedings, the hearing officer issues a "recommended decision," and the CFPB Director considers that recommendation and "issue[s] a final decision and order." §§ 1081.400(d), 1081.402(b); see also § 1081.405.

Congress's design for the CFPB differed from the proposals of Professor Warren and the Obama administration in one critical respect. Rather than create a traditional independent agency headed by a multimember board or commission, Congress elected to place the CFPB under the leadership of a single Director. 12 U. S. C. § 5491(b)(1). The CFPB Director is appointed by the President with the advice and consent of the Senate. § 5491(b)(2). The Director serves for a term of five years, during which the President may remove the Director from office only for "inefficiency,...