United States: DOJ Brief Opposing CFPB Brings More Uncertainty

On March 17, the U.S. Department of Justice submitted a brief to the D.C. Circuit asserting that the Consumer Financial Protection Bureau's single-director structure violates the Constitution's separation of powers in the CFPB v. PHH Corporation case.

CFPB's Single Director Structure

The Democratic-controlled 111th Congress created the CFPB as part of the Dodd-Frank Act in the wake of the 2008 financial crisis. Since then, the CFPB has acted as a watchdog over the consumer-finance industry, including loans, credit cards, and other financial products and services offered to consumers. The CFPB is headed by a single director who is appointed by the president, with the advice and consent of the Senate, for a term of five years. Under the law, the director may only be removed by the president "for cause."

Proponents of the bureau argue that it provides "a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace" and that Congress structured the agency under a single director, removable "for cause" only, in order to make the CFPB a powerful, centralized, independent force for protecting consumers in the financial marketplace.1

Critics of the bureau argue that the CFPB is "destructive and dangerous" in large part due to the fact that the director is unaccountable to "Congress, the president, voters, and the democratic process."2 Jeb Hensarling, R-Texas, congressman and chairman of the powerful House Financial Services Committee and vocal critic of the CFPB, has argued that the bureau's unconstitutional structure has harmed consumers by allowing it to "act unilaterally to eliminate access to credit options and increase consumer costs."3

PHH Case

The constitutionality of the bureau's governing structure came to a head in October 2016 when a divided three-judge panel for the U.S. Court of Appeals for the District of Columbia held that the "for cause" removal of the bureau's director is unconstitutional. In PHH Corp. v. Consumer Financial Protection Bureau, Circuit Judge Brett Kavanaugh wrote that "the CFPB, lacks that critical check and structural constitutional protection, yet wields vast power over the U.S. economy."4 The decision marked the first time that a court ruled against the CFPB on the constitutionality of the bureau's structure.

Importantly, the three-judge panel opted not to dismantle the bureau in light of its unconstitutional structure, but instead remedied the defect by striking the "for cause" portion of the law. This ruling would allow the president to supervise the director, and remove him or her without cause.

The CFPB requested an en banc review of the October ruling before the entire D.C. Circuit. On Dec. 22, the solicitor general filed a brief supporting the CFPB request for en banc review, arguing that the court erred in its constitutional analysis. En banc review was granted, the earlier ruling vacated, and the D.C. Circuit set a hearing for May 24, 2017. By vacating the ruling, the D.C. Circuit removed the possibility of President Trump firing CFPB Director Richard Cordray during the pendency of the case on the basis of the three-judge panel's ruling. The D.C. Circuit ordered full briefing from the parties, including the DOJ, on three specific issues pertaining to important constitutional and statutory issues at stake.

The Trump Administration Weighs in on the Constitutionality of the CFPB

On Friday, March 17, the DOJ urged the entire D.C. Circuit to agree with the three-judge panel's conclusion that the CFPB's structure is unconstitutional. According to the DOJ's brief, "a removal restriction for the Director of the CFPB is an unwarranted limitation on the President's executive power." The DOJ, however, stopped short of asking the court to eliminate the agency as a result of the constitutional defect. Instead, the DOJ sided with the three-judge panel's decision that the proper remedy "is to sever the provision limiting the President's authority to remove the CFPB's Director, not to declare the entire agency and its operations unconstitutional." The DOJ's position that the D.C. Circuit should strike the "for cause" removal restriction rather than declare the entire agency and its operations unconstitutional is a signal that the Trump administration prefers a reformed CFPB rather than no CFPB at all.

The DOJ brief differs markedly from the brief of the U.S. Solicitor General filed pre-election under the Obama administration, which sided with the CFPB and asked the court to grant rehearing en banc. The DOJ brief is also at odds with the CFPB, which argues the agency structure is constitutional and urges a ruling affirming the constitutionality of the CFPB. It is the stark contrast between the position of the CFPB and DOJ provoking the most discussion on the DOJ brief. Indeed, the gap highlights the concerns addressed by the D.C. Circuit in its initial PHH opinion. The current structure of the CFPB leaves the director in an unfettered position of power, with its single director terminable only for cause and untouchable in its policy and enforcement decisions by the executive branch and Congress. The DOJ brief speaks out against the current structure and argues that it is unconstitutional. That, coupled with a judicial climate of concern regarding overreaching by President Trump with respect to executive order travel ban, makes the disparate views and interplay of several branches of government in the case a fascinating study on checks and balances.

What will be most disappointing to Republicans and President Trump, and which is entirely possible given the issues the D.C. Circuit requested to be briefed, is an outcome which avoids the constitutional issues and decides the case on the basis of the statutory provisions of the Real Estate Settlement Procedures Act ("RESPA"), the statute at issue in the underlying CFPB enforcement proceeding. Courts have long adhered to the doctrine of constitutional avoidance, which promotes disposition of cases on issues other than constitutional questions. It is entirely possible, if not very likely, that the court will decline to rule on the constitutional issues at stake and decide the case on RESPA or administrative law grounds.

Regulatory Landscape Under Trump-Controlled CFPB

In the meantime, Cordray remains in office and it is business as usual at the CFPB. A decision by the D.C. Circuit to abandon the three-judge panel's decision and leave the CFPB and statutory language in place will mean that there will be renewed calls for Trump to fire Cordray for cause. A Trump-appointed CFPB director will likely seek to dismantle the actions taken by the CFPB during Director Cordray's tenure. It is also likely that a Trump-appointed CFPB director would elect to pursue a more laissez faire regulatory scheme than Cordray's CFPB. For example, Rep. Hensarling has called for a Trump-appointed CFPB director to push reforms such as limits on class action "lawsuits wherein plaintiff law firms get fortunes but injured financial consumers get pennies."

A Trump-controlled CFPB would largely leave a regulatory "vacuum" in the consumer financial services space. State attorneys general, however, have publicly indicated that they plan to significantly increase their presence and police the financial services industry even if the CFPB is weakened. It is therefore likely that, even under Trump's CFPB, enforcement actions against companies in the financial services space will continue, but primarily at the state rather than the federal level.

This will be particularly true in states where attorneys general have historically been active in bringing consumer enforcement actions, such as New York, New Jersey, Illinois, Connecticut, Massachusetts and California. These state regulators would likely play an increasingly active role in enforcing state and federal law against companies in the consumer financial services space.

Over the last 15 years, state attorneys general have grown adept at collectively utilizing their resources to bring major multistate investigations. State attorneys general will look to build on this foundation, and we anticipate increased enforcement actions aimed at business in industries like debt buying and collecting, auto finance, service-member lending, payment processing, credit reporting, cybersecurity, information governance and privacy.


1. Motion to Intervene By Attorneys General of the States of Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont and Washington, and the District of Columbia, Phh Corp. et. al. v. Consumer Financial Protection Bureau, No. 15-1177 (D.C. Cir. Jan. 23, 2017).

2. Jeb Hensarling, Op-Ed., How We'll Stop a Rogue Federal Agency, Wall. St. J., Feb. 8, 2017, https://www.wsj.com/articles/how-well-stop-a-rogue-federal-agency-1486597413.

3. Press Release, Representative Jeb Hensarling, Chairman Hensarling: CFPB Mission Important, But No Bureaucracy Should Evade Checks and Balances (Mar. 17, 2017).

4. PHH Corp. v. Consumer Fin. Prot. Bureau, 839 F.3d 1 (D.C. Cir. 2016).

The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Reade Jacob
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.