CFPB Submits Brief In Advance of Hearing To Determine Constitutionality of Leadership Structure

The Consumer Financial Protection Bureau has filed its brief in advance of the En Banc Appeal hearing set for May 24 in the U.S. Court of Appeals for the District of Columbia in the case of PHH Corp. v. CFPB.

The CFPB pulls no punches in its brief, and sets the tone from its opening statement:

This case began as a challenge to a kickback scheme orchestrated by a mortgage lender, Respondent PHH, but it morphed into a constitutional attack on the government’s primary enforcer of consumer financial laws.

The CFPB is right in that this case has developed into a debate about the legitimacy of the agency itself. The D.C. Court of Appeals ruled last year that the leadership structure of the CFPB is unconstitutional, and should be changed so that the director can be fired for any reason. Currently, the director can only be fired by the president for cause.

After losing its appeal, the CFPB filed for an En Banc hearing before the entire bench for the D.C. Court of Appeals. The original appeal was heard before a three-judge panel. In granting the En Banc request, the court asked three primary questions:

  1. Does a single leadership structure violate Article II of the Constitution, which declares that laws must be faithfully executed?
  2. Whether the Court could avoid the constitutionality issue if it agrees that the Bureau’s order against PHH — a $109 million penalty for allegedly engaging in a kickback scheme — should be vacated, and
  3. What happens if the En Banc review holds that an original Administrative Law Judge was “inferior,” because he was not appointed.

With respect to the constitutionality of the CFPB’s leadership structure — a single director, which is different than other federal agencies, such as the Federal Trade Commission and Federal Communications Commission, which are helmed by multiple commissioners, not surprisingly, the CFPB argues that PHH is barking up the wrong tree.

The issue here is whether the President’s power has been unconstitutionally limited. Even if fellow commissioners can keep an eye on one another, that does not give the President any greater power. If a multi-member commission is somehow interfering with the President’s constitutional authority, that interference cannot be remedied by the members of the commission itself.


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