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Consumer Financial Protection Bureau found structurally unconstitutional

The U.S. Court of Appeals for the District of Columbia has found unconstitutional the structure of the Consumer Financial Protection Bureau (“CFPB”), the Bureau proposed by Elizabeth Warren to ward against abuses by financial institutions. The ruling challenges the construct that a congressionally-established independent agency may be headed by a single director who may only be removed for cause.

Initially, the court states, the CFPB was to be “another traditional, multi-member independent agency.” However, as the court concludes, the CFPB was ultimately established as “an independent agency headed not by a multi-member commission but rather by a single Director.” It is the latter part of this statement, “… by a single Director,” that the court finds problematic, within the framework of an independent agency. The court holds that the single-director structure, in the context of a congressionally-created independent agency, departs from history and threatens individual liberty, for reasons bound up in agency control and the separation of powers. The court also takes issue with the limitation on the executive’s ability to remove the head of that agency. The court’s remedy is to have the CFPB operate as an executive agency, of which the President “now has the power to supervise and direct the Director of the CFPB.” The court also holds that a three-year statute of limitations was applicable to the enforcement action in dispute.

Judge Henderson, concurring in part and dissenting in part, states that the opinion unnecessarily reaches the question of the constitutionality of the CFPB. Given that there were other reasons to reverse the award in the enforcement action, she opines, the court should have not decided “a constitutional question,” because “there is some other ground upon which to dispose of the case,” citing Nw. Austin Mun. Util. Dist. No. One v. Holder, 557 U.S. 193, 205 (2009); Rostker v. Goldberg, 453 U.S. 57, 64 (1981). This position will likely come up, should this case be subject to further appeal.