Supreme Court Decision Alters Roadmap for CFPB Reform, Analysts Argues
By CU Today Staff —
WASHINGTON—The U.S. Supreme Court's recent decision strengthening presidential authority over independent federal agencies has fundamentally changed the debate over reforming the CFPB, according to a new analysis from the Cato Institute.
Rather than continuing to push for replacing the Bureau's single-director structure with a bipartisan commission, Congress should instead focus on limiting the agency's powers, changing its funding structure and tightening statutory guardrails, the report argues.
In commentary examining the Court's June 29 decision in Trump v. Slaughter, Cato policy policy analyst Solveig Singleton said the ruling effectively ends the long-held assumption that bipartisan commissions provide continuity across presidential administrations. The Court held that presidents may remove members of the Federal Trade Commission without cause, even though federal law provides commissioners with fixed terms and limits removal to specific circumstances.
For years, many critics of the CFPB have advocated replacing its powerful single director with a bipartisan commission, arguing that multiple commissioners would produce more deliberate policymaking and reduce regulatory swings between administrations. Singleton contends that rationale has been undercut by the Supreme Court's ruling because future presidents can simply remove commissioners who stand in the way of their policy agendas.
"The era of stable bipartisan commissions" is effectively over, Singleton argued, adding that while commissions may still improve internal deliberation, they are unlikely to provide the policy stability reformers once envisioned. She pointed to the repeated adoption and repeal of net neutrality rules by the Federal Communications Commission as evidence that commissions have never guaranteed regulatory consistency.
Instead, Singleton argues lawmakers should direct their attention toward structural reforms that would place clearer limits on the CFPB's authority regardless of who occupies the White House. Among the reforms already under consideration in Congress are moving the Bureau's funding from the Federal Reserve System to the annual congressional appropriations process, requiring more rigorous cost-benefit analyses before issuing rules, limiting the Bureau's subpoena authority and more clearly defining its power to regulate deceptive and abusive practices. She also notes that some policymakers continue to advocate abolishing the CFPB entirely and transferring its consumer protection responsibilities elsewhere.
Singleton also recommends lawmakers consider additional changes that have received less attention, including eliminating the CFPB's supervisory authority over financial institutions, guaranteeing jury trials when the bureau seeks punitive civil penalties and establishing a corps of administrative law judges independent from the agency itself.
The broader lesson from the Supreme Court's decision, Singleton concludes, extends well beyond the CFPB. By placing greater control of independent agencies in the hands of the president, the Court has shifted responsibility for ensuring regulatory stability back to Congress. Rather than relying on agency structure to constrain regulators, lawmakers will need to write more precise statutes that clearly define agencies' powers and limitations.
For credit unions and other financial institutions regulated by the CFPB, the analysis suggests future reform efforts may increasingly center not on who leads the Bureau, but on narrowing its authority, strengthening congressional oversight and reducing the regulatory discretion that has long been a point of contention among industry groups and policymakers.
Originally reported by CU Today.