In a blow to the Trump administration, a D.C. Circuit Court of Appeals on Wednesday ruled that the single-director structure of the Consumer Financial Protection Bureau (CFPB) is constitutional, reversing a 2016 decision by a three-panel ruling.
The case had been brought by PHH Corp., which argued the bureau’s setup was unconstitutional because it put too much power in a single director, and that the CFPB misapplied RESPA law. PHH Mortgage Corp. had been fined $109 million by the bureau for alleged misconduct.
Although it lost its constitutionality argument, the court upheld the panel’s opinion for PHH on the RESPA issue.
“Applying binding Supreme Court precedent, we see no constitutional defect in the statute preventing the president from firing the CFPB director without cause. We thus uphold Congress’ choice,” Judge Nina Pillard wrote for the court.
“The Supreme Court’s removal-power decisions have, for more than 80 years, upheld ordinary for-cause protections of the heads of independent agencies, including financial regulators. That precedent leaves to the legislative process, not the courts, the choice whether to subject the bureau’s leadership to at-will presidential removal,” Pillard wrote. “Congress’ decision to provide the CFPB director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will. We have no warrant here to invalidate such a time-tested course.”
A CFPB spokesman said the agency is still “analyzing the decision.” Former CFPB Director Richard Cordray, whose resignation late last year set off a power struggle for leadership of the agency, tweeted about the ruling.
“Seeing the DC Court of Appeals has issued a strong opinion today favoring the independence of the CFPB,” he wrote. “Some other statutory issues mixed. Much to talk about here, more than can be said in a quick Twitter feed. A historic ruling, maybe soon on its way to the Supreme Court.”
Maybe. Attorney Alan S. Kaplinsky of Ballard Spahr LLP doubted there will be a further appeal.
“PHH won on the RESPA issue. The Republicans no longer need to give Trump the authority to fire the director without cause,” Kaplinsky told The Title Report’s sister publication Dodd-Frank Update. “At least for the time being, I see no Democratic initiative to change the structure of the CFPB. That might change if the CFPB gets weakened even more by [acting director] Mulvaney.”
Richard Horn of Richard Horn Legal, PLLC said PHH may back away from the constitutionality question.
“Considering the change in leadership at the CFPB, they might like their chances on remand to the CFPB on the factual issue under RESPA of whether the payments for reinsurance were for the reasonable market value (and thus, satisfied the 8(c)(2) exemption),” Horn told The Title Report. “If PHH does appeal the decision on the CFPB’s constitutionality, it will be interesting to see if the Justice Department still agrees that the director should be removable at will, considering the new permanent director will be appointed by the Trump administration and have a term that lasts through the next, and possibly different administration.”