The agency that writes federal debt collection rules survived this challenge, though it now answers more directly to the President.
The CFPB's leadership by a single Director removable only for inefficiency, neglect, or malfeasance violates the separation of powers; a plurality concluded the removal protection is severable, so the Bureau may continue to operate with a Director removable at will by the President.
- Case
- Seila Law LLC v. Consumer Financial Protection Bureau
- Citation
- 591 U.S. 197 (2020), No. 19-7
- Court or agency
- Supreme Court of the United States
- Date
- June 29, 2020
- Precedential
- Yes (published)
- Law
- Other
Summary
The CFPB issued a civil investigative demand to Seila Law, a California firm offering debt-related legal services. The firm argued the Bureau's structure was unconstitutional. The Supreme Court agreed that the Director's removal protection was invalid but, through a plurality joined in the result by four other Justices, left the rest of the agency intact.
Background
Congress created the Consumer Financial Protection Bureau after the 2008 financial crisis and transferred to it the administration of 18 existing federal statutes, including the Fair Debt Collection Practices Act. The Bureau was headed by a single Director serving a five-year term, removable by the President only for “inefficiency, neglect of duty, or malfeasance in office.”
In 2017 the CFPB issued a civil investigative demand to Seila Law LLC, a California law firm providing debt-related legal services. The firm refused to comply, arguing the Bureau’s structure violated the separation of powers. The district court and the Ninth Circuit enforced the demand.
What the court held
Chief Justice Roberts wrote for the Court. On the constitutional question, joined by Justices Thomas, Alito, Gorsuch, and Kavanaugh, the Court wrote: “We hold that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers.” The President’s executive power generally includes the power to remove those who exercise it on his behalf, and the Court declined to extend earlier exceptions to a single-Director agency with this much power.
On the remedy, the Chief Justice, joined by Justices Alito and Kavanaugh, concluded that the removal protection is severable from the rest of the Dodd-Frank Act. Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, dissented on the constitutional question but agreed with the severability judgment. Justice Thomas, joined by Justice Gorsuch, dissented from the severability analysis, writing that the Court should not have addressed severability in this case. The Court vacated the Ninth Circuit’s judgment and remanded.
Our take
Seila Law matters to debt collection mainly because of what did not happen: the CFPB was not abolished, and its authority to write and enforce rules under the FDCPA continued. The CFPB went on to finalize Regulation F, its comprehensive debt collection rule (12 C.F.R. part 1006), which took effect November 30, 2021.
The practical effect is that the Bureau’s direction can change with each President. That makes it more important that consumers understand their rights come from the statute itself. The FDCPA’s private right of action, statutory damages, and attorney’s fee provisions are written into the law by Congress and are enforced by consumers in court.
What it means if you’re sued in Texas
Whatever happens at the CFPB, collectors pursuing you in Texas must follow the FDCPA and the Texas Debt Collection Act, and you have the right to defend any lawsuit filed against you. A free case review is available if you want help understanding your rights.
Takeaway
CFPB rules and enforcement priorities can shift with each administration, but the FDCPA itself, and consumers' private right to sue under it, come from Congress and do not depend on the CFPB.
Sources
Primary authority
Secondary sources
This summary and analysis are general information, not legal advice. Later decisions, amendments or agency actions may change the law; check the current status before relying on it.