By Helen Mac Murray | December 03, 2019

Soon, the Supreme Court will decide the constitutionality of the Consumer Financial Protection Bureau’s structure. The court may have been unable to resist taking up Seila Law v. CFPB, which involves a governing agency’s total lack of checks and balances.

The unusual structure of the CFPB has been hotly debated. As a former chief of the consumer section of the Ohio attorney general’s office, and as an attorney practicing across the United States before local, state, and federal regulators, I’ve witnessed the critical need for the very checks and balances that are missing from the statute that created the CFPB. Congress has no role in appropriating its $500 million budget, and the president has no role in discretionary supervision of its powerful director.

As a result, there was little recourse when the CFPB repeatedly failed to follow the clear text of its authorizing law, the Consumer Financial Protection Act. Examples of unchecked abuse started right at the beginning of the investigative process. For instance, when the bureau issues civil investigative demands or subpoenas to a target company, the law requires it to state reasons for its investigation, to put the company on notice of the alleged violations. But in practice, the CFPB merely declares that it is investigating its targets for violating the entire act — a statute thousands of pages long. Unfortunately, no one had the power to force the bureau to comply with the law.

Two appellate courts eventually scolded the bureau for ignoring the statutory requirements. But in the years before that, targets had no idea what the allegations were against them or how to address them. The recipients of these subpoenas were instead subjected to CFPB's broad fishing expeditions and faced compliance with hugely expensive legal processes. This could be very damaging, particularly for small businesses.

Only after several appellate courts found that the subpoena process violated the law did CFPB change to comply with it. And this is but one example of the many ways in which the bureau has failed to act in compliance with its statute, possibly as a result of its overall lack of accountability within government.

I base my view of this on my many years of both running a consumer protection section in a government agency, as well as interacting with many such agencies over the years. Why does this matter now? Careful thought needs to be put into whether the agency's structure and its attendant lack of accountability and supervision led to CFPB's abuses.

This matters. When a government agency intended to improve compliance with the law itself fails to follow the law, citizens become cynical, and respect for the rule of law is put at risk.

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