The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB) to invigorate consumer financial protection by consolidating responsibility for those laws’ interpretation and enforcement in a single agency. Even before the CFPB opened its doors, industry forces set out to weaken it through bills that would change its single-director structure, among other means.
They lost that fight in Congress – repeatedly. But now the CFPB’s opponents have been given a glimmer of hope by the three-judge panel deciding a mortgage firm’s appeal of a CFPB enforcement order. If those judges follow Supreme Court precedent, however, that hope will be short-lived and the challenge to the CFPB’s structure will fail, just as it has in two prior federal district court cases.
The latest case involves a company, PHH, which has been ordered to pay $109 million in restitution for illegal kickbacks to mortgage insurers that caused PHH’s customers to pay extra. After a full hearing before an Administrative Law Judge and then the CFPB’s Director, PHH appealed the CFPB’s decision to the U.S. Court of Appeals for the D.C. Circuit. Among a slew of arguments raised by the company, the court expressed particular interest in one. The three-judge panel, which will hear oral arguments on April 12, has asked the parties to focus on the constitutionality of statutory limits on the president’s authority to remove the sole head of an agency like the CFPB.
By statute, the president may remove the CFPB Director only for “inefficiency, neglect of duty, or malfeasance in office.” 12 U.S.C. § 549(c)(3). PHH argues that the Constitution requires an agency headed by a single officer to be removable by the president without cause. Fortunately, Supreme Court precedents defining the scope of the removal power foreclose that argument.
The central flaw of PHH’s argument is that the Constitution is silent about whether an agency should be headed by a committee or a single officer. In fact, prior litigants have argued that multi-member heads of agencies are constitutionally suspect. The Supreme Court rejected that argument in Free Enterprise Fund v. Public Company Accounting Oversight Board (2010), embracing the view that agencies with a single head or a multi-member commission are constitutionally equivalent.