Supreme Court to Rule on Trump’s Power to Fire Head of Consumer Bureau

WASHINGTON — The Supreme Court announced on Friday that it would hear a challenge to the leadership structure of the Consumer Finance Protection Bureau, agreeing to decide whether the president is free to fire its director without cause.

The bureau, the brainchild of Elizabeth Warren, then a law professor at Harvard and now a senator and presidential candidate, was created as part of the Dodd-Frank Act, which was passed in 2010 after the financial crisis. In an effort to protect the bureau’s independence, the statute said the president could remove its director only for cause, defined as “inefficiency, neglect of duty or malfeasance.”

That limit on presidential power has been repeatedly challenged in court by businesses that say it violates the separation of powers. The Trump administration agrees with the challengers. The bureau once took the opposite position, but it changed its stance in September, agreeing that its director could be fired at will.

Indeed, Kathleen Kraninger, the bureau’s director, urged the Supreme Court in a speech that month to hear a challenge to her own job security.

“My decision to no longer defend the removal provision does not mean that the bureau will stop its work,” she said, adding that striking the provision should not affect the rest of the law that created the bureau.

Republicans and business groups have long accused the bureau of regulatory overreach. In 2017, President Trump appointed Mick Mulvaney, now his acting chief of staff, to be the bureau’s acting director, and he promptly suspended much of the agency’s enforcement activity, halting investigations, freezing hiring and stopping data collection.

In February, after Ms. Kraninger took over, the bureau eliminated tough restrictions on payday lenders that had been set to take effect later in the year. In September, though, she announced that the bureau would continue to publish a database of consumer complaints about financial companies, something Mr. Mulvaney had suggested he might eliminate.

The case the court agreed to hear, Seila Law v. Consumer Finance Protection Bureau, No. 19-7, was brought by a law firm that objected to an investigation of aspects of its debt relief services. The firm challenged the bureau’s power to pursue the investigation, saying its director was unconstitutionally insulated from presidential control.

The firm lost in the United States Court of Appeals for the Ninth Circuit, in San Francisco, which concluded that Supreme Court precedents upholding limits on presidential power to remove officials on multimember commissions and independent counsels allowed the bureau’s structure.

In the Supreme Court, the firm argued that those precedents were inapposite and that “the court has never upheld the constitutionality of an independent agency that exercises significant executive authority and is headed by a single person.”

In a brief for the bureau, Solicitor General Noel J. Francisco agreed, joining the law firm in urging the court to hear the case.

“A single-headed independent agency presents a greater risk than a multimember independent commission of taking actions or adopting policies inconsistent with the president’s executive policy,” Mr. Francisco wrote. “Unlike a multiheaded commission, which generally must engage in at least some degree of deliberation and collaboration, a single director can decisively implement his own views and exercise discretion without those structural constraints.”

“It is for such reasons that the framers adopted a strong, unitary executive — headed by the president — rather than a weak, divided one,” he wrote. “Vesting such power in a single person not answerable to the president represents a stark departure from the Constitution’s framework.”

Last year, in a separate case, the District of Columbia Circuit upheld the contested provision. Justice Brett M. Kavanaugh, then a judge on that court, issued a 73-page dissent arguing that “the C.F.P.B. is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single director.”

In the case the Supreme Court agreed to hear, both sides agreed that the bureau’s structure violated the Constitution. In light of that consensus, Mr. Francisco suggested that the justices “may wish to appoint” a lawyer to defend the constitutionality of the law.

In a friend-of-the-court brief, the House of Representatives said the bureau’s structure was lawful and valuable. “Where an agency is headed by a single individual, the lines of executive accountability — and presidential control — are even more direct than in a multimember agency,” the brief said. “If the president determines that the C.F.P.B. director is failing in her duty to enforce the consumer protection laws, the president can remove and replace the director.”

Though the law firm and the bureau agreed that the bureau’s structure violated the Constitution, they appeared to be divided about whether actions taken by the director would have to be voided if the Supreme Court struck it down. Mr. Francisco wrote that “the proper remedy for the constitutional violation is to sever the provision limiting the president’s authority to remove the bureau’s director.”

The law firm, by contrast, wrote that striking the contested provision should have practical consequences. “Parties do not seek this court’s review on constitutional questions for kicks,” its brief said. “They do so in order to obtain meaningful relief.”