With the CFPB’s Future in Doubt, What Happens Next?

Consumer financial protection is one of those phrases, like voting rights and universal health care, that’s far more controversial than it sounds. In the dozen years since Congress created the Consumer Financial Protection Bureau, it has proved to be a partisan minefield, relentlessly contested by lawmakers, businesses and the courts.On Oct. 3 the Supreme Court will hear a challenge to the legality of the bureau’s funding. Chances are high that most of the justices will agree with the Fifth Circuit Court of Appeal’s ruling that the CFPB’s budget design is unconstitutional because it circumvents the congressional appropriations process.Legally, that may well be the correct outcome. Practically, it could invalidate a ream of effective regulations and eradicate years of progress in cleaning up the shadiest areas of finance. Congress should prepare for what comes next.The CFPB was established in 2011, a key part of the Dodd-Frank law. Before it was created, seven different agencies had some responsibility for helping to defend consumers against harmful, deceptive or fraudulent practices. But all had other, more pressing considerations — the Federal Reserve is always going to emphasize monetary policy over consumer protection, for instance. After the financial crisis, placing those duties under one roof had a certain logic.Wary of the financial industry’s influence in Washington, however, the bureau’s advocates tried to maximize its independence from both the executive branch and the legislature. Instead of relying on Congress, it would receive an annual budget from the Fed. And unlike the Securities and Exchange Commission or the Federal Deposit Insurance Corp., each led by five political appointees, it would have a single director — named by the president to a five-year term — who could only be fired for “inefficiency, neglect of duty, or malfeasance in office.”