Although Congress created the Consumer Financial Protection Bureau (“CFPB”) nearly a decade ago, constitutional challenges to its leadership structure remain ongoing. Until recently, only the D.C. Circuit had ruled on the constitutionality of the CFPB structure at the appellate level in PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. 2018) (en banc), and did so approvingly. The D.C. Circuit rejected the notion that an agency headed by a single director who can only be removed for cause is unconstitutional. Early this month, the Ninth Circuit concurred with the D.C. Circuit in CFPB v. Seila, LLC.
For background, the CFPB is led by a single director appointed by the President and confirmed by the Senate for a period of five years, unless extended. The director may be removed from her position only for “inefficiency, neglect of duty, or malfeasance in office” – commonly known as a “for cause” restriction. The Seila plaintiff argued that the CFPB Director exercises substantial law enforcement powers similar to the leaders of other Executive Branch departments, many of whom can be removed at the President’s will. Therefore, according to the plaintiff, the CFPB structure violated the separate of powers doctrine.
The Ninth Circuit observed that the Supreme Court had previously upheld for-cause restrictions as a means to “maintain an attitude of independence” from the President’s control. Under that reasoning, the Ninth Circuit held that, by having a for-cause restriction, Congress sought to ensure that the agency discharged its quasi-legislative and quasi-judicial powers independently of the President’s will.
There is enhanced interest in this case stemming from Justice Brett Kavanaugh’s appointment to the United States Supreme Court because he dissented in PHH, opining that the CPFB structure was “overwhelmingly” unconstitutional. Justice Kavanaugh, however, may not have a chance to revisit this issue unless there is a circuit split, which is less likely after the Ninth Circuit’s ruling in Seila. That said, the Second Circuit is set to rule on the agency’s constitutionality in CFPB et al. v. RD Legal Funding LLC et al. and the Fifth Circuit is set to do so in CFPB v. All American Check Cashing Inc. et al. A finding that the CFPB’s structure is unconstitutional could upend a decade’s worth of CFPB’s actions and decisions, which is why legal observers continue to watch these cases as we will.