Quick reaction to the U.S Department of Justice’s filing in PHH v. CFPB calling the CFPB unconstitutional
The Trump administration DOJ just filed a brief in opposition to the CFPB. What does it say? What does it mean?
The Trump administration DOJ just filed a brief in opposition to the CFPB. What does it say? What does it mean?
Initial reaction and analysis only.
If you are reading this you have probably been following the PHH v. CFPB case, if not read this and this if you want background. Caught up? Good. Because things just got a little (more) crazy. The Department of Justice (DOJ) filed an amicus curiae brief today opposing the CFPB. In its brief the DOJ argues that the CFPB as currently structured in unconstitutional. This is an unsurprising reversal from the position of the previous administration’s DOJ. It also creates the rare circumstance that the Department of Justice is disagreeing with another U.S. Government agency in court.
A partial summary of the DOJ’s brief
Briefly (pun!) the DOJ’s brief argues that the restriction on the President to fire the CFPB director for cause is unconstitutional. It contends that the case of Humphrey’s Executor v. United States, which upheld for-cause protections in the context of a multi-member commission, should not be extended to single-director agencies. The DOJ argues that the Constitution’s investment of the President with the powers to “take care the laws are sufficiently executed” indicates that the President should, as a general rule, have the power to remove executive branch officials because that authority is necessary to manage the executive branch.
The DOJ argues that Humphrey’s Executor created a limited exception to this general rule for multi-member commissions (in that case the FTC). The DOJ argues this was done in part because the FTC was not considered part of the executive branch but rather quasi-legislative and quasi-judicial. The DOJ also argues that the nature of the FTC as an ongoing “administrative body” whose members had staggered terms (so there was no time where there was a complete turnover in membership), and the limit that no more than three commissioners could be members of the same political party was also relevant to the holding of Humphrey’s Executor. According to the DOJ those characteristics help justify the limited removal power because they are there to promote continuity, moderation, expertise, and deliberation. While the DOJ acknowledges that the court has somewhat changed its mind on whether agencies like the FTC really aren’t executive in nature, it argues that makes the structural features of commissions all the more important.
Those features are not present in the CFPB. The CFPB has a sole director which according to the DOJ “embodies a quintessentially executive structure.” The DOJ argues that the constitution places executive power in the President, and while the President can act through subordinate officers he must also be able to remove them. According to the brief the risk of “dispersion of executive power” is greater with a sole-director removable for cause than a commission because while a commission needs a majority to act, placing some check on its power, a sole-director has no such check.
Additionally, the DOJ contrasts multi-member commissions, where Presidents are able to appoint at least some members and therefore influence policy, with the CFPB director’s five-year term. The DOJ argues this may prevent a President from having the opportunity to appoint a director at all. The DOJ argues this lack of control over appointment or removal unconstitutionally separates the CFPB from the constitutional officer empowered to exercise executive power, the President.
The DOJ also points out that the combination of the CFPB’s power and structure is unique. While the DOJ grants there are other agencies with a similar structure they either have a much narrower jurisdiction (Office of Special Counsel), fundamentally different responsibilities (Social Security Administration), or in the case of the FHFA, a narrower jurisdiction and contemporaneous creation with the CFPB. The DOJ also notes that in the case of the Office of Special Counsel and the SSA the president at the time indicated concern that the structure might be unconstitutional.
The DOJ agreed with the panel decision that the proper remedy was to sever the “for-cause” protection. This would leave the CFPB in place. It disagreed with the panel by arguing that the court could avoid dealing with the constitutional issue as it adjudicates the case, but the DOJ argues that the court should resolve the issue since it has been fully briefed and will likely come up again anyway, such as in the case of State National Bank of Big Springs v. Lew that is stayed pending the resolution of PHH.
What does it mean?
It means that the CFPB issue isn’t going away any time soon. It remains to be seen if this argument will persuade the D.C. Circuit to uphold the panel decision’s finding that the CFPB is unconstitutional. However, even if it doesn’t, it indicates that in the event PHH loses and appeals to the Supreme Court the Solicitor General will side with PHH and encourage the Court to take the case up.
It may also indicate that the Trump DOJ is going to move to check the CFPB in court on cases where the CFPB acts inconsistently with Trump administration policy. We won’t see this in bread-and-butter fraud cases everyone agrees should be brought, but to the extent the CFPB takes aggressive positions on the law or its own authority (something it has been known to do) it may face the DOJ siding with the defendant.
Finally, what does it mean for Director Cordray? It is unclear whether this is the sole attack vector the administration is using to remove him, but it does seem to indicate they would like to see him gone. The President has other options that will likely be faster, but he may be content to let this play out. We will have to wait and see.
Update 1: Also worth noting that the DOJ explicitly refused to take a position on the underlying statutory issues at play, so PHH isn’t getting any support from the administration on that front.