Seila Law, however, continued to press its constitutional objection to the validity of the CID filing a petition for a writ of certiorari on the question of "[w]hether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers." The Supreme Court granted Seila Law's petition on the question presented in the petition and directed the parties to brief and argue a second question: "If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. §5491(c)(3) be severed from the Dodd-Frank Act?"Court ReactionThe justices reaction to the arguments presented by counsel for Seila Law, the CFPB, the House of Representatives, as amicus curiae, and Paul Clement, as amicus curiae in support of the decision of the Ninth Circuit, which the CFPB refused to defend, was mixed, but telling.

In the wake of the 2008 financial crisis, Congress created the Consumer Financial Protection Bureau, an independent agency dedicated to consumer protection in the financial sector. The CFPB’s jurisdiction includes banks, credit unions, securities firms, debt collectors, foreclosure relief services, and many other financial industry players.Since its founding, the CFPB has been the subject of court challenges, particularly regarding its status as an “independent agency.” Independent agencies are government agencies that exist outside of federal executive departments — they are not overseen by a member of the President’s Cabinet — and, while managed by the executive branch, are largely independent of presidential control because the President’s power to dismiss the agency’s leader is limited. As to the CFPB, the President appoints the CFPB’s Director for a five-year term, by and with the advice and consent of the Senate. 12 U.S.C. § 5491(b)(2). Until recently, under the Dodd-Frank Act, which created the CFPB, the President could not remove the CFPB’s Director at-will; rather, the President could only remove the Director for “inefficiency, neglect of duty, or malfeasance in office.“ 12 U.S.C. § 5491(c)(3).The President’s power to remove the CFPB Director changed as a result of a recent Supreme Court decision. On June 29, 2020, in Seila Law LLC v. Consumer Financial Protection Bureau, 140 S.Ct. 2183 (U.S. 2020), the Court held that the Dodd-Frank Act’s restriction on the President’s ability to remove the CFPB’s single-director violated the constitutional separation of powers. The Court emphasized that the President’s power to remove agency heads flows from Article II, § 1, cl. 1 of the Constitution, which states that the executive power is vested in the President, who must take care that the laws are faithfully executed. Seila, 140 S.Ct. at 2191. The Court, however, rejected the argument that, if the leadership structure is u

Given uncertainty about the CFPB's future, it is possible this agenda or the agency's approach to each rulemaking could change in 2021 no matter which party wins the presidency.See 12 U.S.C. §5491. Public Law 111–203.

tral District of California rejected Seila Law's constitutional challenge and ordered full compliance with the demands in the CID.1 When Seila Law appealed the Central District's order to the U.S. Court of Appeals for the Ninth Circuit, Seila Law was met with nothing less than a unanimous panel, which needed less than seven pages to again reject Seila Law's constitutional challenge.2 Seila Law, however, continued to press its constitutional objection to the validity of the CID filing a petition for a writ of certiorari on the question of "[w]hether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers." The Supreme Court granted Seila Law's petition on the question presented in the petition and directed the parties to brief and argue a second question: "If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. §5491(c)(3) be severed from the Dodd-Frank Act?"The Supreme Court's DecisionCFPB Director's Removal Protection Violates Constitution's Separation of PowersIn assessing whether protecting the CFPB Director from removal by the President for anything other than "inefficiency, neglect of duty, or malfeasance in office"3 violates the Constitution's separation of powers, the Supreme Court began with the general rule that "the President possesses the authority to remove those who assist him in carrying out his duties." The general rule, derived from Article II Section I,4 of course, comes with exceptions, but only two.

[2] Id. [3] See 12 U.S.C. § 5491. [4] See 12 U.S.C. § 5491(c)(3); see e.g., CFPB v. Nationwide Biweekly Admin., No. 18-15431 (9th Cir.); CFPB v. CashCall, Inc., No. 18-55479 (9th Cir.); CFPB v. All Am. Check Cashing, Inc., No. 18-90015 (5th Cir.); CFPB v. RD Legal Funding, LLC, No.18-2860 (2d Cir.); Community Fin. Servs. Assoc. v. CFPB, No. 1:18-cv-0295 (W.D. Tex.); CFPB v. Ocwen Fin. Corp., No. 9:17-cv-80495 (S.D. Fla.); BCFP v. Progrexion Mktg., Inc., 2:19-cv-00298 (D. Utah); CFPB v. Navient Corp., 3:17-cv-101 (M.D. Pa.). [5] See CFPB v. Nationwide Biweekly Admin., No. 18-15431 (9th Cir.); CFPB v. CashCall, Inc., No. 18-55479 (9th Cir.); CFPB v. All Am. Check Cashing, Inc., No. 18-90015 (5th Cir.); CFPB v. RD Legal Funding, LLC, No.18-2860 (2d Cir.); Community Fin. Servs. Assoc. v. CFPB, No. 1:18-cv-0295 (W.D. Tex.); CFPB u. Ocwen Fin. Corp., No. 9:17-cv-80495 (S.D. Fla.); BCFP v. Progrexion Mktg., Inc., 2:19-cv-00298 (D. Utah); CFPB v. Navient Corp., 3:17-cv-101 (M.D. Pa.).

The United States Supreme Court has granted certiorari in the matter of Seila Law LLC v. Consumer Financial Protection Bureau to address the question of whether the Consumer Financial Protection Bureau’s (CFPB) single-director structure and the President's authority to remove the director only “for cause,” as prescribed by 12 U.S.C. § 5491(c)(3), violate the separation of powers. The Supreme Court also directed the parties to brief the question of whether, if the CFPB is found to be unconstitutional because of 12 U.S.C § 5491(c)(3), that section can be severed from Dodd-Frank Act, which established the CFPB.

In addition, English renewed her TRO argument that Mulvaney’s role is incompatible with the requirement that the CFPB be "an independent bureau" because, as member of the President’s cabinet, he is an at-will employee of the Administration, removable without cause by the President. See 12 U.S.C. § 5491(a).7 Under 5 U.S.C. § 3349c(1), the President’s authority to use the Vacancies Act to fill vacancies does not apply to positions held by "any member who is appointed by the President, by and with the advice and consent of the Senate to any board, commission, or similar entity that—(A) is composed of multiple members; and (B) governs an independent establishment or Government corporation." See Doc.

When the dust settles from this week, the Democrats appear weakened, and the Administration, strengthened—Mulvaney is in de facto control, according to the DOJ, the CFPB, and a US District judge. Cordray's eleventh-hour maneuvering likely weakens (possibly significantly) Democratic efforts to resist a permanent Trump appointee and Republican CFPB reform efforts.Click here to download PDF.1 Complaint at 1, English v. Trump, No. 1:17-cv-02534-TJK (D.D.C. Nov. 26, 2017).2 Fed. R. Civ. P. 12(b)(1) and (b)(6), among other possibilities.3 Memorandum from Steve A. Engel, Asst. Att'y Gen., to Donald F. McGahn II, Counsel to the President, Designating an Acting Director of the Bureau of Consumer Financial Protection at 1 (Nov. 25, 2017) ("DOJ Memorandum").4 English worked on the original US Treasury Department team that set up the CFPB.5 12 U.S.C. § 5491(b)(2).6 The Vacancies Act provides multiple ways for an executive agency to have an interim head. See 5 U.S.C. § 3345.

As we reported, the DOJ’s Office of Legal Counsel (OLC) has issued a memorandum to the President’s Counsel in which it opined that the President has the legal right to appoint Mick Mulvaney CFPB Acting Director under the provision of the Federal Vacancies Reform Act (FVRA) that authorizes the President to temporarily fill an executive agency position requiring confirmation when the position becomes vacant because the person holding it “dies, resigns, or is otherwise unable to perform the functions and duties of the office.” In the OLC’s opinion, the FVRA provision can be used by the President as an alternative to 12 U.S.C. § 5491(b)(5(B), the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall serve as acting Director in the absence or unavailability of the Director.” We believe the OLC has advanced strong arguments in support of its position.

Mr. Cordray’s parting-shot - his effort to name his own successor by appointing a presumably sympathetic Deputy Director - will likely miss its mark. Under the provision of Dodd-Frank that Senator Elizabeth Warren has cited in support of Mr. Cordray’s maneuver, the CFPB’s Deputy Director serves as acting Director only “in the absence or unavailability of the Director” (12 U.S.C. § 5491(b)(5)), not in the event the Director resigns. Moreover, 12 U.S.C. § 5491(b)(3) states that, “…the Director shall be appointed by the President, by and with the advice and consent of the Senate.”