Does the leadership structure of the Consumer Financial Protection Bureau fly in the face of what the framers of the Constitution have in mind when they established the three branches of the federal government nearly 250 years ago? Or is the structure consistent with other federal agencies and not in need of any change?
Like figuring out the best toppings on pizza or which “Mighty Ducks” movie is the best one, the subjective nature of the debate ensures that there is no right or wrong answer, while also guaranteeing the debate in Congress will continue to rage on for as long as there are Democrats and Republicans.
The Investigations and Oversight Subcommittee of the House Financial Services Committee held a hearing earlier this week to discuss the leadership structure of the CFPB and whether it is constitutional or not. The legal argument is front and center right now as the D.C. Circuit Court of Appeals prepares to hear arguments in the case of PHH Corp. v. CFPB. PHH is fighting a $105 million penalty levied against it by the CFPB on the grounds that the manner in which the CFPB is structured — with a single director — is unconstitutional. Most federal agencies are helmed by multi-person commissions, such as the Federal Communications Commission and the Federal Trade Commission.
Ideological battle lines were drawn from the opening statements and stayed that way throughout the two-hour hearing.
“Nothing embodies the ‘Washington knows best’ mindset than the CFPB,” said Rep. Ann Wagner [R-Mo.], chairwoman of the subcommittee during her opening remarks. Countered Rep. Al Green [D-Texas], the subcommittee’s highest-ranking Democrat, “I apologize to the American people for this shameless abuse of power.”
The hearing featured a quartet of witnesses, three of whom were in favor of changing the leadership structure of the CFPB and one who was in favor of keeping it the way it was. One of those in favor of making a change was Theodore Olson, the former Solicitor General of the U.S., who is now representing PHH in its case.
“The worst delegation of authority is in the CFPB,” Olson said. “I’ve never seen anything like it in any other agency. There is a tremendous breadth of authority given to this agency with very little supervision.”
While not on the subcommittee, Rep. Jen Hensarling [R-Texas], the chairman of the House Financial Services Committee also participated in the hearing, questioning Brianne Gorod, the chief counsel of the Constitution Accountability Center, whether repealing Miranda rights would lead to more convictions for law enforcement agencies.
“If we started beating criminals with rubber hoses, we might get more convictions, but where is due process,” Hensarling asked. “Is this agency, on a net basis, actually helping consumers?
“Free checking offers by banks have been cut in half. The ranks of the unbanked have increased. Bank fees are up. Under the qualified mortgage rule, 1/3 of Blacks and Hispanics are not qualifying for a mortgage. If you look at due process, as we erode checks and balances, is due process being followed at CFPB?”
The D.C. Court of Appeals ruled in October that the leadership structure of the CFPB was unconstitutional, and addressed the issue by granting the President the power to fire the CFPB’s director with or without cause. Previously, the director was only allowed to be fired for cause. The CFPB appealed the ruling, asking for a full review of the D.C. Court’s 18 judges. The review was granted. Oral arguments are scheduled to be heard in May.
