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Consumer Case Could Open Door to Corporate Influence

Published in: The Hill
A general view of the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., as seen on October 4, 2019.  © Graeme Sloan/Sipa USA; Sipa via AP Images

When Americans vote in the Super Tuesday primaries, one of the issues at stake is corporate power. That same day the US Supreme Court will hear arguments in a case that could open the floodgates to greater politicization and corporate influence in government. 

The case, Seila Law v. CFPB, challenges the constitutionality of the Consumer Finance Protection Bureau, the independent agency charged with protecting US consumers from predatory lenders and abusive debt collectors. Specifically, the bureau’s opponents argue that the president should have unfettered power to remove the head of an independent agency. Right now, the president can only remove the bureau’s head “for cause.”

Congress purposely set up the bureau this way to protect it from political influence, in response to one of the worst financial crises in US history. Nearly $11 trillion in household wealth disappeared and over 8 million people lost their homes. The government’s failure to regulate the financial industry contributed to the disaster. 

A congressionally commissioned inquiry concluded that policymakers and regulators could have prevented the financial crisis if they had clamped down on Wall Street excesses. The investigators also found that the financial industry had used its wealth and power to exert pressure to weaken regulations on markets and financial products. In response to the public outcry over political discretion and corporate influence, Congress created an independent agency to protect consumers from predatory lenders, with an agency head who could be removed only for specific reasons, not simply at the president’s political whim, insulating decision-making from political or corporate influence.

This structure appears to have worked. Under the Obama administration, the bureau put in place key rules to protect consumers when they take out loans or use other financial services, which it is authorized to supervise and enforce. The bureau imposed penalties, and its lawyers brought cases against a range of bad actors, including misleading payday and auto title lenders and deceptive debt collectors. Under its first head, the bureau recovered over $11 billion for consumers, benefitting nearly 10 percent of the US population. 

The bureau maintains a database of consumer complaints that allow the public, advocates and academics to track trends in abuses. It also provides tools and educational materials on consumer rights. Under its current leadership, the bureau has rolled back some protections, yet the bureau’s insulation from political interference remains critical.

Other agencies responsible for a wide variety of regulations that protect Americans’ health, safety, housing, civil rights and elections also have leaders who may be removed only “for cause,” to protect them from political interference. That doesn’t mean they’re free to do as they wish; there are safeguards and accountability for agency heads. The president still has the power to remove someone if they are involved in “malfeasance” or wrongdoing, neglect their duties, or are inefficient in carrying them out. The president retains the power to nominate many agency leaders, and Congress has substantial oversight of their activities. The courts also can take action if they determine an agency has overstepped. 

Agency heads need to know they are safe from interference from either side of the political aisle if they are to carry out their duties and create a stable regulatory framework. A Supreme Court ruling for the bureau’s opponents could have far-reaching consequences on federal regulatory and administrative processes by allowing future presidents to remove agency leadership for any reason. That could open up administrative agencies to even more corporate influence and control. 

Three senators made this point in a briefing to the Supreme Court, saying that if moneyed interests are successful in “limiting the independence of independent agencies, agencies will become easier to capture and bend to the interests of private influence, if not … neutered altogether.”

The senators caution that one of the objectives of attacking agency independence is aggressive deregulation. Deregulatory efforts by the Trump administration have led to more pollution and contaminated drinking water, fewer controls on predatory lenders, and potentially more dangerous workplaces. Further deregulation can affect all aspects of Americans’ lives, with more and more of the burden falling on all of us to ensure our own well-being, even when it is out of our control. 

The Supreme Court is deciding not only the fate of the Consumer Finance Protection Bureau, but potentially all independent agencies that are critical to protecting our health, safety and environment. All branches of the government should be guarding the regulatory processes from forces that try to undermine people’s basic rights. Without these protections, we’ll be left to fend for ourselves.

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