House Leaders Urge Supreme Court to Oppose Challenge to CFPB’s Constitutionality
Last Monday, the House of Representatives filed an amicus brief asking the U.S. Supreme Court to reject a petition to hear a case that would determine the constitutionality of the Consumer Financial Protection Bureau (CFPB).
The dispute originates in a case called Seila Law v. CFPB where Seila Law, a law firm, refused to turn over documents to the CFPB when requested during an enforcement action. The defendant argued that the CFPB was unconstitutional because the CFPB’s director could only be fireable for cause (as opposed to at-will), which violates the Constitution’s separation of powers. The Ninth Circuit Court of Appeals disagreed, ruling that “the CFPB’s structure is constitutionally permissible.”
In their amicus, House leaders commended the Ninth Circuit, stating that the president has more control over a federal agency led by a single-director than one headed by several individuals. “Indeed, where an agency is headed by a single individual, the lines of Executive accountability—and Presidential control—are even more direct than in a multi-member agency,” said the amicus brief. “If the President determines that the CFPB Director is failing in her duty to enforce the consumer protection laws, the President can remove and replace the Director. And unlike in multi-member agencies, removal of “a single officer” will “transform the entire
CFPB and the execution of the consumer protection laws it enforces.”
Despite these arguments, Seila Law’s petition also garnered a lot of support speaking out against the CFPB. In August, seven amicus briefs were filed by several trade associations, a think-tank, and twelve Attorneys General, including the following:
- U.S. Chamber of Commerce
- Attorney Generals of Texas, Arkansas, Georgia, Indiana, Kansas, Louisiana, Nebraska, Oklahoma, South Carolina, Tennessee, Utah, and West Virginia
- Separation of Powers Scholars
- Pacific Legal Foundation
- Landmark Legal Foundation
- Cato Institute
- Southeastern Legal Foundation and National Federation of Independent Small Business Legal Center
According to Alan S. Kaplinsky, partner with Ballard Spahr LLP, “All of the briefs argue that the CFPB’s structure is unconstitutional under relevant Supreme Court precedent but do not take a position on what the appropriate remedy should be (i.e. striking all of Title X of Dodd-Frank or only severing the for-cause removal provision).”
Then, in a brief filed last month, the Trump Administration submitted an amicus brief urging the Supreme Court to take up the case, arguing that the federal agency is unconstitutionally structured. The brief also pointed out that CFPB Director Kathy Kraninger had recently “reached the same conclusion.”
Most cases that are petitioned to the Supreme Court are never heard, but the chances of this case being heard are higher than most. “I can’t recall any federal agency ever arguing in court, let alone [at the Supreme Court], that its agency was unconstitutionally created,” said Kaplinsky. “That, in and of itself, would seem to warrant cert being granted.”
