United States: CFPB Appeals Ruling Declaring Single Director Structure Unconstitutional

Last Updated: November 25 2016
Article by Steven D. Lofchie

Most Read Contributor in United States, September 2017

The Consumer Financial Protection Bureau ("CFPB") filed a petition with the D.C. Circuit Court of Appeals to review an October ruling that held the structure of the CFPB to be unconstitutional.

In a two-to-one decision on October 11, 2016, the U.S. Court of Appeals for the D.C. Circuit ruled that the structure of the CFPB violated Article II of the Constitution because it conferred excessive power on a single individual who was not subject to the control of the Executive Branch. The Court noted that the CFPB's structure was distinguishable historically from that of "independent agencies" headed by multiple individuals or commissioners. Those independent agencies, the Court reasoned, were constitutional because multiple commissioners serve as a check on the excessive authority wielded by an individual other than the elected President. Instead of striking down all of the Dodd-Frank Act provisions that created the CFPB, the D.C. Circuit held that the constitutional deficiency could be cured by interpreting the Dodd-Frank Act to allow the President of the United States to fire the CFPB's Director without cause, effectively transforming the CFPB from an independent agency to an executive agency and enabling its continued operation.

In its petition, the CFPB characterized this case as the "most important separation-of-powers case in a generation," and criticized the October decision by pointing out that three other agencies also are headed by a single person who may be removed only with cause. The CFPB argued that the D.C. Circuit erroneously "wrote them off" because these other agencies were all established recently and none had "deep historical roots." The CFPB argued that the D.C. Circuit used arbitrary criteria for distinguishing between multi-member and single-member commissions. The Court's ruling had maintained that multi-member commissions reflected "a deep and abiding concern for safeguarding the individual liberty protected by the Constitution." In response, the CFPB argued that the single-member commission has features that make it more accountable to the President: the fact that a single member serves for five years, for example, and can be appointed by a President within a single term. By contrast, multi-membered commissions serve staggered terms that can make it impossible for the President to nominate a majority of members during a single term. Lastly, the CFPB claimed that the D.C. Circuit ruling "would have serious detrimental effects on the ability of public officials and private litigants to enforce RESPA and police the giving or receiving of kickbacks in exchange for referrals of business."


The single director structure of the CFPB is a partisan invention. It is a regulatory structure that suffocates internal dissent, or the expression of differing views, and is inherently flawed. Designed largely by Senator Elizabeth Warren (D-MA), that structure has allowed the CFPB's director to churn out statements that are favored by the Senator – without being concerned about challenges from other regulators who might disagree. Unfortunately, it also has allowed Senator Warren effectively to silence those who disagree with her instead of responding to their legitimate positions. For other examples of this type of conduct, see, e.g., Senator Warren Lets Loose on SEC Chair White; Senator Warren Asks CFTC to Withdraw EEMAC Report on Position Limits; Senator Warren Questions ''Good Intentions'' behind Study Challenging DOL's Fiduciary Proposal; and Senators Introduce Legislation to Limit FRB's Lending Authority.

This brings us to the possibility of an odd turn of events. If the CFPB "wins" its case, then President-Elect Trump will appoint the person who assumes complete control of the CFPB over the next five years without allowing the possibility that any other commissioner at the CFPB may voice their dissent, and without authorizing any meaningful congressional or presidential oversight concerning that control. The irony of that result should not be lost on Senator Warren.

This is not the way that U.S. financial regulation should be conducted. No single person is right all of the time. Constructive debate is a good thing. Ideally, the CFPB will lose or drop its case, and Congress will amend the rules of the CFPB in order to create a five-person commission that will encourage a diversity of views. Ideally those views will continue to include those that are favored by Senator Warren, along with opposing views.

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.

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