The U.S. Court of Appeals for the District of Columbia Circuit Court issued its decision in PHH Corporation v. Consumer Financial Protection Bureau in October, 2016, holding that the Consumer Financial Protection Bureau ("CFPB") was unconstitutionally structured. The D.C. Circuit Court based its decision on the fact that the single-director could only be removed for cause. Instead of disassembling the agency entirely, the appellate court elected to sever the unconstitutional "for-cause" removal provision so that the president would be permitted to remove the Director of the CFPB at will. This blog, written by Zachary Schultz, discusses the aftermath of the initial PHH decision surrounding the authority of the Director of the CFPB.
In the months following the 2016 decision, it was unclear whether the newly-elected Republican president was going to remove Richard Cordray – the Director of the CFPB, although there was plenty of speculation that he would.
However, as expected, the CFPB sought out en banc review. On February 16, 2017, an order was entered granting the CFPB's petition for en banc review. The order vacates the October 2016 judgment, sets a briefing schedule, and scheduled oral arguments for May 24, 2017. Among other issues, parties are to address whether the CFPB's structure is consistent with Article II of the Constitution and if not, whether it is appropriate to sever the for-cause provision.
Politically, the order makes it more difficult for the president to fire Cordray because the order vacating the D.C. Circuit Court panel's judgment means that the president is no longer permitted to fire the director "at will." Rather, the director can, once again, only be removed for cause, which pursuant to 12 U.S. Code § 5491, allows removal only for "inefficiency, neglect of duty or malfeasance in office." For now, the order thus temporarily protects Cordray's position from unilateral action by the president.
Previously, the CFPB attempted to defend its structure as constitutional by referencing the structure of several other administrative agencies, each of which has a single director and are considered constitutionally structured. Although the D.C. Circuit Court was not persuaded by these comparisons, the outcome of the en banc Court's decision has the potential to have a significant impact on other agencies.
Today, the outcome remains entirely uncertain. With oral arguments not scheduled to occur until May, the appeals court is not likely to decide the case before fall. If either party is successful in appealing the case to the Supreme Court, a final decision could be delayed even further.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
