On Tuesday, we posted here and here about the D.C. Circuit's decision in PHH Corporation v. CFPB, which held that the CFPB's governing structure is unconstitutional because its director is too independent of the President — the CFPB is an independent agency run not by a multi-member commission (the members of which serve as checks on one another), but by one director (who may only be removed by the President for cause, see 12 U.S.C. 5491(c)(3)).
In an email to supporters and consumer advocates, Rich Dubois, the executive director of National Consumer Law Center, said this about the decision:
NCLC leaders and leading supporters —
You are probably already aware that a three-judge panel of the U.S. Court of Appeals for the District of Columbia issued a decision yesterday holding the structure of the Consumer Financial Protection Bureau (CFPB) to be unconstitutional, because it is headed by a single director removable only for cause, rather than at the will of the President. I'm writing to share some of our thoughts on this decision, and what it means for CFPB's future.
The decision, PHH Corp. v. CFPB, 2016 WL 5898801 (D.C. Cir. Oct. 11, 2016), struck down the for-cause removal provision, but it left all other portions of the statute (the Dodd-Frank Act, which created the CFPB) intact. It allows the CFPB to continue operating with exactly the same powers as before — except that, if this decision stands (rehearing en banc and an appeal to the Supreme Court are very likely), the President will have greater authority to remove the Director of the CFPB. This authority could also give the President more influence over the CFPB, compromising and politicizing the agency.
Striking the provision that limits removal of the Director to situations where there is cause should have no effect in the short term, since President Obama has no interest in removing Richard Cordray, the current director of the CFPB, and has been very supportive of the CFPB’s work. The next President would merely be able to appoint a new Director a little sooner, since even without this decision the new President will have the right to appoint a new Director once Cordray's 5-year term expires in 2018.
How this authority will impact the agency’s independence remains to be seen. But, interestingly, even some in the banking industry appear to support an independent agency. American Banker reported: "[The decision is] the worst thing that can happen to the banking industry and consumers," said Richard Hunt, president of the Consumer Bankers Association. “It leads to a whipsaw effect every four years. We need certainty and stability."
We know that the CFPB’s foes will attempt to use this decision against the agency. The decision could also encourage industry challenges to CFPB rules and enforcement actions as being the product of an unconstitutionally structured federal agency, and we will be on the watch for those.
NCLC and our many allies will continue our work advocating for and defending strong CFPB rules, and will fight back against ongoing and new Congressional attempts to gut the CFPB and weaken its independence. We are grateful to all of you who stand with us in this fight, and for your ongoing support of NCLC's work advancing consumer rights and economic justice!