T
he CFPB is the brainchild of Massachusetts Senator Elizabeth Warren, created the post-2008 financial crisis. In October of 2019, the Supreme court granted certiorari in the Seila Law v. CFPB which would whether the leadership structure of the Agency was constitutional. The court ordered that the parties to prepare statements and argue a second question: “If the Consumer Financial Protection Bureau [“CFPB”] is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. § 5491(c)(3) [which permits the President to remove the Director of the CFPB only for cause] be severed from the Dodd-Frank Act?”
BUT WHERE DID THIS ALL BEGIN?
The 2008 financial crisis almost crippled the American economy. In fact, today, we feel a ripple effect of what it caused and so many businesses and minority and vulnerable groups in the country have never yet recovered. In response to this, Congress passed a Dodd-Frank Act, which included the Consumer Financial Protection Act, (CFPA). This resulted in the creation of perhaps one of the most powerful federal agencies to have ever existed in the Americas’ history. The powers of CFPB stems from the fact that it has a single director, it is the structure it has been following ever since its creation. But that’s not the problem, CFPB’s broad rulemaking and enforcement authority and the fact that the director is well covered from removal except with a reasonable cause make it very powerful. This means that the director of CFPB cannot be removed from office. As a matter of fact, the director can only be removed by the president during his or her five-year term “inefficiency, neglect of duty, or malfeasance in office” which is a position difficult to prove and which the CFPB has contested so much.
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Ever since its inception, CFPB’s constitutionality has been challenged time and again. What has been in question is the “for-cause” removal provision of the CFPA, which gives the president the authority to remove the
CFPB director only when he or she is inefficient, or when they neglect their duties or malfeasance in office. So far, challenges to this ordinance have been brought forward in courts to the Second, Third, Fifth, Ninth, Tenth, Eleventh and D.C. Circuits.
THE BATTLE SO FAR
It has been tough. One of the most significant challenges in this battle occurred before an en banc D.C. Circuit in PHH Corp. v. CFPB. In this case, a majority of the D.C Circuit held that the leadership structure of the agency eas constitutional, a rule that reversed the three-judge panel decision written by Justice Brett Kavanaugh. Kavanaugh would then dissent from the en banc opinión that reversed the original decision. In his dissenting opinion, Kavanaugh held that CFPB’s structure of governance was unconstitutional because the Director’s power and authority were “massive in scope, concentrated in a single person, and unaccountable to the President.”
THE SUPRE
HEARS ARG CFPB’S CONS What is unclear is whether Kavanaugh will recuse himself in Seila Law, especially when he has already given his stand on the matter. However, he is not required to do so. The most recent challenge and the one to be reviewed by the Supreme Court was raised by Seila Law. Seila Law involves Seila Law’s refusal to comply with the CFPB civil investigative demand (CID). When CFPB moved to enforce the CID in federal district court, Seila Law argued that CFPB’s structure was unconstitutional, resulting in an unenforceable CID. The legality of CFPB was held before the district court and on appeal to the Ninth Circuit, with the argument that the CFPB’s leadership was constitutional, it has since asserted the new position that the for-cause removal provision is unconstitutional. The Supreme Court has now taken up Seila Law’s petition for Certiorari. SEVERABILITY QUESTIONS
THE POWER IS NOW MAGAZINE | APRIL 2020
