The Consumer Financial Protection Bureau headquarters in Washington, D.C.

In a long-awaited ruling this week, Supreme Court moved to limit the independence of the director of the Consumer Financial Protection Bureau (CFPB), the nation’s chief consumer watchdog agency.

The court, in a 5-4 decision (PDF), said that the leadership structure of the bureau was unconstitutional because it violated the separation of powers. Under that structure, the President could only remove the director, who serves a five-year term, under special circumstances. At most other federal agencies, the president has the authority to fire the leadership at will.

Although the decision limits the independence of the director, it does leave the agency in place. The court case had challenged the constitutionality of the bureau.

More on the CFPB

“The court could have overturned the CFPB in its entirety, but it did not do that,” says Anna Laitin, director for financial fairness and legislative policy for Consumer Reports. “Still it is disappointing that the court found the single-director to be unconstitutional.”

For consumers, the decision doesn't have any immediate impact. But it does mean that whoever wins the presidential election in November will have the authority to put their own person at the agency.

A Controversial Agency

For now, the court decision is a victory for President Donald Trump and those in the business community who have urged more limits on the CFPB, which was founded in 2011 under President Barack Obama. Business leaders complained that the agency was politically biased and engaged in regulatory overreach.

The CFPB's creation was spearheaded by Sen. Elizabeth Warren, who conceived the bureau when she was a professor at Harvard Law School. Its mandate is to combat unfair and deceptive financial practices on behalf of consumers, many of whom were struggling in the wake of the 2008-2009 recession.

Among other the measures, the CFPB has acted to limit predatory lending practices, assisted student loan borrowers from abuses by lenders, and sought full restitution for Wells Fargo customers who had phony accounts opened in their names by the bank.

The CFPB also maintains a Consumer Complaint Database, which tracks and responds to consumer’s problems with banks, mortgage and auto lenders, student-loan servicers, and other financial services companies. Bureau staff are assigned to follow up on those complaints and encourage financial companies to address them.

The CFPB's current director, Kathy Kraninger, took office in 2018, replacing acting Director Mick Mulvaney, who also served as director of the Office of Management and Budget and later White House chief of staff.

What Consumers Can Expect

During this time, the CFPB has eased many of its regulatory restrictions, including rolling back an earlier rule designed to limit short-term, high-interest loans, known as payday loans.

A 2019 study (PDF) by the nonprofit Consumer Federation of America found that that CFPB enforcement actions had declined by 80 percent between 2015 and 2018, while the monetary relief provided to consumers dropped by 96 percent.

Yet consumer complaints filed to the agency have surged in recent years, with complaints setting new records in March and April, in large part due to the coronavirus pandemic, according to research by the nonprofit U.S. PIRG.

The Supreme Court decision does not mean the agency will act differently for consumers now. But there could be a big change if a new administration comes in, following this year’s presidential election, says Mike Landis, litigation director at the U.S. PIRG.

“Since the CFPB director can now be appointed at will, the next administration could put in someone who will stand up for consumers,” Landis says.

Despite the shift in CFPB policy, consumers should still file complaints with the agency, says Christina Tetreault, financial policy manager for Consumer Reports.

“At a time of great financial uncertainty, the bureau is still a place to seek help,” says Tetreault.

Consumers can also look to their state consumer protection agencies, which may be able to act on complaints.