CFPB Abandons Defense of Its Own Constitutionality

For years, subjects of CFPB enforcement actions have challenged the constitutionality of the agency's structure, arguing that separation-of-powers principles forbid Congress to grant enforcement authority to an independent agency whose director is protected against being fired without cause by the President. Throughout that time, the agency has defended its own constitutionality, and has prevailed in the only two cases that have so far resulted in final decisions by federal courts of appeals: PHH Corp. v. CFPB, in which the U.S. Court of Appeals for the D.C. Circuit upheld the agency's structure, and CFPB v. Seila Law, in which the Ninth Circuit agreed with the D.C. Circuit. Now, even as challenges continue in two other circuits, the Second and Fifth, in which the agency has so far steadfastly defended itself, the agency has joined in a filing in the U.S. Supreme Court asking the Court to overturn the Ninth Circuit's decision in Seila Law and hold the agency's structure unconstitutional.

The Department of Justice had changed sides on the issue when the Trump Administration took office, and it argued strenuously against the position taken by the agency's own lawyers in PHH Corp. The CFPB, however, held its ground not only in PHH, which was briefed while Richard Cordray remained in place as the agency's director, but also in other appellate challenges briefed and argued after he stepped down and was replaced by Trump appointees--first Mick Mulvaney as Acting Director, and then Kathy Kraninger as Director.

However, after the agency prevailed in the court of appeals in the Seila Law case, the losing party filed a petition for a writ of certiorari asking the Supreme Court to hear the issue. The Solicitor General, after obtaining multiple extensions of time to respond to the petition, today filed a brief "acquiescing" in the request that the Court hear the case. The brief is signed not only by the Solicitor General and other DOJ attorneys, but also by attorneys for the CFPB, who join fully not only in the brief's request that the Supreme Court hear the case, but also in its argument that the Court should reverse the lower court's decision and hold the CFPB's structure unconstitutional. Also today, Director Kraninger sent a letter to congressional leaders informing them that the CFPB would no longer defend the constitutionality of the statutory provisions protecting its director from Presidential removal.

Because neither DOJ nor the CFPB will now defend the agency's structure, the Supreme Court will, if it takes the case, have to appoint someone else--a friend of the court--to argue in favor of the lower court's judgment.