December 10, 2023

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After a spate of recent activity which has included introducing long-awaited regulations for payday lenders and prepaid cards and a nearly $200 million fraud settlement from Wells Fargo, the Consumer Financial Protection Bureau must now face a new challenge—more oversight.

On Tuesday, a Washington, D.C. circuit court found the structure of the CFPB to be unconstitutional. More specifically, the court took issue with the inability for other arms of the government to review or rebuke the Bureau’s judgements or actions and the unilateral power imbued in the CFPB’s director—currently Richard Cordray.

The judgement states:

The Director enjoys significantly more unilateral power than any single member of any other independent agency. By “unilateral power,” we mean power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.

The court then goes on to proclaim that the director of the CFPB is given more power and autonomy than the speaker of the house, senate majority leader, or even a Supreme Court justice.

The Consumer Financial Protection Bureau—which was brainchild of Senator Elizabeth Warren—was created in the wake of the financial crisis by the Dodd-Frank Act, the legislation meant to reform the financial sector and protect the public from predatory and dangerous practices. Title X, the section of the Act which calls for Bureau’s formation, states that a director will be appointed by the President and confirmed by the Senate. The Bureau then has the ability to “administer, enforce, and otherwise implement federal consumer financial laws, which includes the power to make rules, issue orders, and issue guidance.” But in those endeavors, the Bureau and its director are not directly subject to oversight from any of the branches of government.

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