CFPB Agrees that For-Cause Removal Single Director Status is Unconstitutional

As we previously reported, Selia Law LLC (Selia) filed a petition for writ of certiorari with the U.S. Supreme Court on June 28, 2019, appealing the Ninth Circuit’s ruling upholding the constitutionality of the Consumer Financial Protection Bureau’s (CFPB) single directorship.  On September 17, 2019, the CFPB filed its responding brief, in which it agrees with Selia’s position, and urges the Supreme Court to grant certiorari.

The litigation arose from a CID that the CFPB served on Selia.  The CFPB considered Selia’s responses to the CID inadequate, and filed suit in the Central District of California to enforce it.  As part of Selia’s opposition to the CID, it argued that the CFPB’s single director structure was unconstitutional.  Selia argued that the director was unconstitutionally insulated from presidential control, because the director can only be removed by the president during his or her five-year term for “inefficiency, neglect of duty, or malfeasance in office”—a position which the CFPB contested at the time.  12 U.S.C. § 5491(c)(3).  The district court disagreed with Selia, and entered an order enforcing the CID.

On appeal, the Ninth Circuit affirmed, holding that the issue was “thoroughly canvassed” by the D.C. Circuit’s PHH Corp. v. CFPB en banc opinions (there were several concurring and dissenting opinions filed by members of the panel, which we reported on here), and agreed with the majority in that case.  The Ninth Circuit likened the CFPB to the Federal Trade Commission (FTC), for which the Supreme Court upheld removal restrictions that were similar in nature to the restrictions on removing the CFPB’s director.  See Humphery’s Executor v. United States, 295 U.S. 602 (1935).  Although the FTC is headed by a multi-member commission—and not by a single director, as is the CFPB—the Ninth Circuit did not find that difference dispositive, because the Humphery’s Executor decision “did not appear to turn on” that issue.

In its response brief, the CFPB states that it has now “also concluded the statutory restriction on the president’s authority to remove the Director violates the Constitution’s separation of powers, and that . . . [the CFPB] agrees with petitioner that certiorari is warranted.”  The CFPB keys in to the differences between a single director and the multi-member commission structure found constitutional by the Supreme Court in Humphery’s Executor.  The Supreme Court found that presidential removal restrictions on multi-member commissions were constitutional, in part, because of the deliberative quasi-legislative or quasi-judicial function of such commissions.  That is, decisionmaking in the multi-member context is a cooperative process, and restrictions on the removal of multiple members was thought to “facilitate group decisionmaking and promote an inherent institutional continuity.”  Additionally, multi-member bodies are typically appointed to staggered terms, ensuring that a president will always be able to appoint at least some members of the commission during his or her term.

The CFPB argues that the single director structure is unconstitutional because a single director’s power is executive in nature—rather than quasi-legislative or quasi-judicial—enabling him or her to take unilateral action, regardless of whether those actions are consistent with the president’s executive policy.  Further, given the five-year term of the CFPB director appointment, a president may be unable to exercise any power whatsoever over the CFPB director at any point during a given term.  The CFPB therefore urges the Supreme Court to find the single director structure unconstitutional, but argues that the Supreme Court should “limit the solution to the problem.”  Rather than find that the CFPB as a whole is unconstitutional, the CFPB urges the Supreme Court to rule that the president has the authority to remove a CFPB director at will.

LenderLaw Watch will monitor the case, and will continue to bring you the latest developments from the Supreme Court.

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