Supreme Court Rules CFPB Structure Unconstitutional

News from S&P Global Market Intelligence

The Supreme Court has ruled the Consumer Financial Protection Bureau is unconstitutionally structured, a decision that will change the nature of the agency's leadership.

Legal analysts had projected the Supreme Court would rule as it did, finding the CFPB to be unconstitutional but providing a relatively straightforward fix. At issue is the CFPB's director, whom the president could fire only "for cause," such as for negligence, per the Dodd-Frank Act that created the agency. In a 5-4 decision issued June 29, the Supreme Court ruled that the single-director leadership structure should be appointed at the president's discretion, resolving the constitutionality question and allowing the CFPB to continue operating. The justices also ruled that the issue was "severable" from the rest of the Dodd-Frank Act, leaving the massive financial regulation law largely intact.

The Supreme Court's ruling also has potential implications for the Federal Housing Finance Agency and the Office of the Comptroller of the Currency, both agencies with a single director.

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