CFPB's Kraninger Says Her Position Is Unconstitutional

CFPB Director Kathy Kraninger is abandoning the agency’s defense of its structure and now said her position is unconstitutional.

In letters to House and Senate leaders, as well as a brief asking for a U.S. Supreme Court review of the agency’s structure, Kraninger contended that the CFPB’s director should be permitted to be removed by the president for any reason.

Under current law, the director may only be removed for cause.

Consumer groups quickly condemned Kraninger’s decision.

In the court case, the CFPB had issued a civil investigative demand to Selia Law, a law firm, as part of its investigation into whether debt-relief companies were engaging in unlawful acts or practices.

The law firm challenged the constitutionality of the section of Dodd-Frank that created the CFPB, saying that the director’s position was unconstitutional.

The Obama Administration argued that the structure was constitutional, but the Justice Department under President Trump disagreed. Separately, the CFPB has argued in court that the structure was legal.

The court sided with the bureau at the district and appellate level, but the law firm has asked the Supreme Court to take the case. The court has already declined to consider a separate appeal of the director’s position.

“This case presents a suitable vehicle for the Court’s review of the question,” the agency told the court in the Selia case.

“A single-headed independent agency presents a greater risk than a multi-member independent commission of taking actions or adopting policies inconsistent with the President’s executive policy,” the CFPB said, in joining the Justice Department in the brief.

In her letter to congressional leaders, Kraninger said that it is in the bureau’s best interest to have its constitutionality settled. She added that if the Supreme Court accepts the case, it will appoint an advocate to defend the agency’s current structure.

“My determination that the for-cause removal provision is unconstitutional does not affect my commitment to fulfilling the Bureau’s statutory responsibilities,” she wrote.

Consumer groups sharply criticized Kraninger for the agency’s change of position.

“It is shocking to see the head of a consumer protection agency who took the job with eyes open about the baseless claims against the agency suddenly reverse course and decide to undermine her own authority to protect the public,” said Lauren Saunders, associate director of the National Consumer Law Center. .

“After refusing to defend consumers from predatory lenders and debt collectors, Kraninger’s refusal to defend her own agency follows the pattern of not caring enough to do her job,” said Derek Marin, Director Derek Martin.