WASHINGTON (CN) — In a case that raises fundamental questions about the scope of executive power, the Supreme Court will hear arguments Tuesday on whether the structure of the Consumer Financial Protection Bureau is constitutional.
At base, Tuesday's case concerns the constitutionality of the requirement that the director of the Consumer Financial Protection Bureau can only be removed for cause, but the roots of the dispute extend into the New Deal and as far back as the country’s founding itself.
The case comes from Seila Law, a debt relief law firm based in California that is challenging the CFPB's attempts to investigate whether it broke telemarketing rules. The firm raised its constitutional challenges to the agency after the CFPB went to court to enforce a request for documents the firm initially bucked.
Originally the brainchild of then-Harvard Law professor Elizabeth Warren, Congress created the CFPB as part of the Dodd-Frank Act in response to the 2008 financial crisis. The agency is tasked with regulating financial products like mortgages and student loans and has jurisdiction over banks, debt collectors and other financial institutions.
The CFPB is an independent agency that operates within the Federal Reserve system and draws its funding primarily from the Federal Reserve's earnings rather than the typical appropriations process in Congress.
The agency is also somewhat unique in that it is led by a single director who serves five-year terms and can only be removed "for inefficiency, neglect of duty, or malfeasance in office." This type of for-cause removal provision is common in independent agencies and is meant to insulate decision makers from political influence.
While independent agencies are found throughout the government — the Federal Communications Commission, Federal Election Commission and the Securities and Exchange Commission are all examples — they most often are led by multiple members, rather than by one director.
By giving them a stronger protection from removal than other agency heads, Congress intends these agencies to operate based on their independent judgment and expertise, rather than to advance the political goals of the president.
Sai Prakash, a professor at the University of Virginia School of Law, explained the for-cause removal provision limits the president's control over the agency by removing a key power to dispense with an agency head not following the president's vision.
"These statutes make it harder for the president to remove and implicitly prohibit him from directing them," Prakash said in an interview. "Of course, what does it meant to direct someone if you can't remove them except for cause? No one thinks that, or at least most people don't think that, you can remove someone for not following your instructions when the whole idea behind the statute is to create an independent agency."
The Constitution does not contain any guidance on the president's ability to remove executive branch officials and Congress has for most of the history of the republic created agencies meant to operate above the political fray.
One of the first cases to address the constitutionality of such an arrangement was the Supreme Court's 1926 decision in Myers v. United States. In that case, a postmaster first class challenged his removal from office under an 1876 law that required the Senate's consent before the president could fire a host of government officials.