Single Director Structure of Dodd-Frank Act Held to be Unconstitutional

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GREAT NEWS for Our Industry!


Single Director Structure of Dodd-Frank Act Held to be Unconstitutional

Today the U.S. Supreme Court announced its decision in Seila Law, LLC vs. CFPB, a case in which a private party challenged the issuance by the Consumer Financial Protection Bureau (CFPB) of a Civil Investigative Demand (CID) on the basis that the structure of the CFPB, as created by Congress in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) violates the Constitution’s separation of powers principle.

Seila Law argued that the CFPB’s structure is unconstitutional because the CFPB Director is removable only “for cause” and not at the will of the president. In issuing its ruling today, the Supreme Court agreed with Seila Law. It held that the structure of the CFPB is unconstitutional to the extent that the position of CFPB Director could not be removed other than for cause.

Further, the Supreme Court determined that Dodd-Frank’s provision that addressed the removal of the Director was severable from the balance of the Act. Finally, the Court ruled that upon striking this provision, the Director of the CFPB may now be removed by the president at will, but that the balance of the Act may stand. A pertinent excerpt of the Court’s ruling is here:

The President’s power to remove—and thus supervise— those who wield executive power on his behalf follows from the text of Article II, was settled by the First Congress and was confirmed in the landmark decision Myers v. United States, 272 U. S. 52 (1926). Our precedents have recognized only two exceptions to the President’s unrestricted removal power. In Humphrey’s Executor v. United States, 295 U. S. 602 (1935), we held that Congress could create expert agencies led by a group of principal officers removable by the President only for good cause.

While we need not and do not revisit our prior decisions allowing certain limitations on the President’s removal power, there are compelling reasons not to extend those precedents to the novel context of an independent agency led by a single Director.
Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control. We, therefore, hold that the structure of the CFPB violates the separation of powers. We go on to hold that the CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may, therefore, continue to operate, but its Director, in light of our decision, must be removable by the President at will.

The full opinion is here: https://www.supremecourt.gov/opinions/19pdf/19-7_n6io.pdf.

Today’s decision ends a multi-year challenge to the Dodd-Frank Act, and it has significant implications for Congress in that it changes the ability of the legislative branch to delegate certain executive branch functions.

It also impacts the way the executive branch controls independent agencies.

Most immediately, the decision has significant impacts on the CFPB and its current Director, Kathleen Kraninger, who was confirmed to the post in December of 2018, for a five-year term.

For our industry, today’s ruling may have an impact on the Small-Dollar Rule, which was initially promulgated in 2017, and for which the CFPB has proposed significant revisions. The revisions were anticipated in April of this year but have not yet been issued.

>We will be providing additional analysis with respect to today’s decision and its impact on our industry.

Thank you.
Ed D’Alessio
Executive Director


Update: Lenders Payment Protection Program-PPP-FISCA & Mr. Woods Update

If you’re connected in any way to “the business of lending to the masses,” I suggest you join FISCA and set up Google Alerts for Max Woods, FISCA, OLA, NAFSA, CFSA, your state association… Resources listed here: https://thebusinessoflending.com/resources/
PS: I know from anecdotal reports that a couple of our peers “have been approved” in Texas and Oklahoma. However, they have NOT YET been funded!
From: Luke Montgomery, President FISCA

Dear Friends,

We’ve had several questions from members regarding the Payment Protection Plan (PPP) loan program through the Small Business Association (SBA). The situation seems to be pretty fluid at this point and no clear answers are available. That being said, we did want to share with you what information we do have.
The information below was taken from an update provided by our friend, Max Wood, in Alabama.
We do not have an official word on the PPP program for our industry, at this time. The most recent factual information we have is that our industry does not likely qualify because we are a financial service company. That information comes directly from the Senator’s office in Washington who is chair of the committee that authored the bill.
Generally, most are not getting a response other than acknowledgment of their application. The bottom line is that the PPP program, at its core, uses existing SBA guidelines and regulations. So, ultimately, the decision to approve or not approve a loan will be made by the SBA.
We know that several of the national trade organizations, including FISCA, are working to clarify that ruling and to have financial service companies included. It is by no means clear, at the moment, if they will be successful.
We encourage you to submit your paperwork if you have not done so. In the event this ruling changes, and if the money remains available, you will at least be in the queue.
We are sure there are many questions you may have, but this is what is known at the moment. We will continue to monitor the situation.
We will report back soon.
Luke Montgomery, President FISCA

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