Both sides in a Supreme Court fight debating the constitutionality of the leadership structure of the Consumer Financial Protection Bureau filed briefs yesterday arguing why the director of the financial regulator should be able to be fired for any reason, not just for cause.
But allowing the president to do so would create a “mutant version” of the agency which would still be “unaccountable” to Congress, according to the brief of Seila Law, which is fighting against having to comply with a Civil Investigative Demand that it received from the CFPB in regards to possible violations of the Telemarketing Sales Rule while selling debt relief services to consumers.
Seila Law argues that the Supreme Court should invalidate the entire section of the Dodd-Frank Wall Street Reform and Consumer Protection Act which created the CFPB. The Supreme Court can not entertain altering the leadership structure of the CFPB to a multi-member commission, such as that used by the Federal Trade Commission and the Federal Communications Commission, because Title X of the Dodd-Frank Act does not allow for such a structure to be used, Seila Law argued in its brief.
The CFPB, meanwhile, argues in its brief that the removal provision of the Act, which if found unconstitutional, should be severed from the rest of the law, and the president should be allowed to fire the director of the agency for any reason.
The difference in decisionmaking is reinforced by the difference in the timing and composition of appointments to the two types of agencies. For a multi-member commission with staggered terms, the President is generally assured to have an opportunity to appoint at least some of its members, and the partisan-balance requirement that is common for such commissions further increases the likelihood that at least some of the holdover members share the President’s views. Many multi-member commissions, moreover, afford the President the unfettered ability to appoint and remove their chairs, which is a significant means of influence.
A number of Appeals Courts have ruled on the constitutionality of the CFPB’s leadership structure, including the D.C. Court of Appeals, which was where Justice Brett Kavanaugh was when it ruled on PHH v. CFPB. Kavanaugh was in the minority when the D.C. Court ruled the CFPB’s leadership structure was not unconstitutional. But none of the Appeals Courts have ruled that the leadership structure is unconstitutional, which makes it odd that the Supreme Court would opt to hear arguments in a case in which there is no split opinions at the lower court levels.
The CFPB issued Seila Law a CID seeking answers to seven interrogatories and four requests for documents. The defendant refused to provide the information, leading the CFPB to file a petition with a District Court, which sided with the regulator. Seila Law appealed that ruling to the Ninth Circuit, which also sided with the CFPB. Seila then appealed the ruling to the Supreme Court.
Arguments in the case will be heard before the Supreme Court on March 3.
