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Though the Consumer Financial Protection Bureau (“CFPB”) has been in existence for only five years, it has already racked up a significant number of victories for consumers—returning nearly $12 billion to 27 million consumers by suing companies for breaking the law, levying a record $100 million penalty against Wells Fargo for creating fraudulent customer accounts, and processing over 1 million consumer complaints.  But, despite these numerous successes (or perhaps because of them), the CFPB finds itself under constant attack.

The most recent is from the U.S. Court of Appeals for the D.C. Circuit.  In October, a three-judge panel ruled that the structure of the CFPB—which is headed by a single director who is removable only “for cause”—is unconstitutional because it violates the separation-of-powers doctrine.  We strongly disagree with the divided panel’s 2-1 ruling.  In an effort to ensure that the panel’s error is corrected, U.S. PIRG Education Fund—along with nine other consumer and civil rights organizations—filed an amicus brief in support of the CFPB’s request for a rehearing before the entire D.C. Circuit.  The Department of Justice also filed a brief in support of the CFPB’s request.  It is important that the October ruling is corrected so that the CFPB remains a strong and independent agency that looks out for consumers.

Here is some more background on the legal questions raised.

Article II of the Constitution—which vests the “executive power” in the president—requires that the president have sufficient control of subordinate executive officers and prevents Congress from limiting such control.  According to the panel, the president lacks the requisite control of the CFPB director because, by statute, the president cannot remove the director at will.  The panel further found that the CFPB is unlike independent agencies (such as the Federal Trade Commission or the Securities and Exchange Commission), whose commissioners have “for cause” removal protection, because the CFPB is headed by a single director as opposed to a multi-member commission.  The remedy, per the D.C. Circuit, is to remove the CFPB director’s “for cause” protection, which now means that the director serves at the pleasure of the president.

However, the D.C. Circuit’s opinion is wrong because it unnecessarily answers a constitutional question and then goes on to answer that question incorrectly.  It is a well-established principle in American jurisprudence that a court should refrain from reaching a constitutional question if the case can be disposed of on other grounds.  In this case, the D.C. Circuit could have decided the case solely on the statutory issues before it (issues not discussed in this blog post).  The D.C. Circuit then compounds its mistake by misapplying the Supreme Court’s separation-of-powers precedent, which does not limit “for cause” removal protection to multi-member commissions.  The opinion also undermines Congress’s goal of structuring the CFPB to effectively protect consumers, free of undue political influence and industry capture.

A decision from the D.C. Circuit on whether to rehear the case is expected sometime in the coming weeks.

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