Federal appeals court rules structure of CFPD constitutional News
Federal appeals court rules structure of CFPD constitutional

The US Court of Appeals for the District of Columbia Circuit [official website] ruled [opinion, PDF] Wednesday that the structure of the Consumer Financial Protection Bureau (CFPD) [official website] is constitutional.

At issue was whether 12 USC § 5491(c)(3) [materials], a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act [materials] that established the CFPB and provides its director with a five-year term after being nominated by the President and confirmed by the Senate and subject to removal by the President only for “inefficiency, neglect of duty or malfeasance in office,” violated Article II of the Constitution [materials], which vests executive power in the President to “take care that the Laws be faithfully executed.”

In its decision, the 7-3 majority draw a parallel between the case at hand and Humphrey’s Executor v. United States [opinion], a case in which the Supreme Court sustained the constitutionality of the independent Federal Trade Commission in 1935.

In doing so, the Court approved the very means of independence Congress used here: protection of agency leadership from at-will removal by the President. The Court has since reaffirmed and built on that precedent, and Congress has embraced and relied on it in designing independent agencies. We follow that precedent here to hold that the parallel provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act shielding the Director of the CFPB from removal without cause is consistent with Article II.

The decision reverses a 2-1 ruling in 2016 [JURIST report] by a three-judge panel of the court that had found the CFPD’s structure to be an unconstitutional constraint on presidential authority but agreed to rehear the case in front of the full court. The origins of the case arises out of a suit brought by the PHH Corporation (PHH) [official site] in 2015 where it sought to vacate a 109 million dollar order imposed on it by the CFPB.

The fight over the CFPD has become a hotly contested partisan issue, with each of the three dissenting judges being republican nominations and both Presidents Barack Obama and Donald Trump [JURIST report] directing the Department of Justice’s resources for and against sustaining the agency’s independence respectively. It is likely PHH will appeal the decision to the Supreme Court.

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