The U.S. Supreme Court did not agree to take up a case Monday that challenges the constitutionality of an Obama-era agency overseeing the financial sector.
The Consumer Financial Protection Bureau (CFPB) was tasked with protecting consumers in the financial sector when it was formed in 2011.
But the agency has been challenged on the legality of many of its initiatives — and even its known legitimacy.
The U.S. Supreme Court rejected the case challenging whether the agency is even constitutional.
The lawsuit argued that the structure of the agency violates the constitutional separation of powers because it’s insulated against meaningful checks by the legislative, executive, and judicial branches.
The groups behind the lawsuit added that this has led to unchecked power to restrict and drive up the cost of financial products, such as mortgages and credit.
The free-market think tank the Competitive Enterprise Institute (CEI), the 60 Plus Association, and the State National Bank of Big Spring, Texas, brought the case forth before eventually petitioning for the highest court to take it up. The groups have pointed to powers unique to the agency; the director, for instance, can be fired only by the president for specified causes.
“Big banks might be able to cope with CFPB rules, but for us and banks like us, the costs and red tape spun out by this agency could become a slow death sentence,” Jim Purcell, president of State National Bank of Big Spring, said in a statement. “We are disappointed in the Supreme Court’s decision not to take our case, but we are also hopeful that these constitutional issues will still be examined in some future lawsuit.”
CEI general counsel Sam Kazman largely echoed those comments.
“We are disappointed by the Supreme Court’s decision to turn down the case,” he said in a statement. “But there are other pending lawsuits that raise these same issues, and we are hopeful the court will have another opportunity to review them.”
The Great Recession, a major economic collapse, was caused by a financial crisis and the subprime mortgage crisis starting back in 2007. The CFPB was created a few years later in response to the financial crisis as part of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
The lawsuit further argued that that the agency director has sweeping power to create, implement and enforce national consumer finance policy singlehandedly. And unlike many other agency heads, this director doesn’t report to the president. The director self-appropriates the organization’s budgets and is unconstrained in the exercise of power within the agency.
The groups behind the lawsuit further argued that this unaccountability to lawmakers or to the president facilitated many abuses of power when Barack Obama was still in office. They added that such power should not stand or be replicated.
The groups behind the lawsuit petitioned the highest court to take up the challenge after losing in the U.S. Court of Appeals for the D.C. Circuit.
“It remains very unfortunate that Congress has not compromised on the governing structure of the CFPB by adopting a commission similar to the FDIC and the FTC,” Joseph Lynyak III, a partner at the international law firm Dorsey & Whitney, said in a statement provided to LifeZette. “Among other things, this would moderate the wide swings in policy and enforcement that have occurred at the CFPB as a result of changes in the administration, as well as bring to the table highly qualified individuals who would have a vote in the complex area of the consumer financial services industry.”
The groups behind the lawsuit petitioned the highest court to take up the challenge after losing in the U.S. Court of Appeals for the D.C. Circuit.
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(photo credit, article image: CFPB, CC BY 2.0,Flickr, Mike Licht & Getty Images)
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