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PHH Corporation, et al. v. Consumer Financial Protection Bureau (D.C. Cir.)

READ CAC’S BRIEF in PHH Corporation, et al. v. Consumer Financial Protection Bureau

PHH Corporation, et al. v. Consumer Financial Protection Bureau involves a challenge to the leadership structure of the Consumer Financial Protection Bureau (“CFPB”), an agency created by the 2010 Dodd-Frank Act to end the longstanding fragmentation of responsibility for consumer financial protection that contributed greatly to the 2008 financial crisis.

After months of evaluating the roots of what is now known as the Great Recession and assessing the types of reforms needed, lawmakers concluded that a major culprit was the failure of a fragmented and unaccountable consumer financial protection regime to safeguard homeowners from reckless financial products. To remedy this, Congress established a new and consolidated entity, the CFPB, that would have the independence and mission focus needed to prevent a recurrence of those problems and respond to the challenges of an evolving financial marketplace. Congress structured the Bureau to be led by a single director, rather than a multimember commission, to avoid the delay and inaction to which commissions are susceptible. And to insulate the Bureau from political interference and industry pressure, Congress provided that this director may be removed for good cause—“inefficiency, neglect of duty, or malfeasance in office”—but not for policy disagreements alone.

In October 2016, the United States Court of Appeals for the D.C. Circuit held, in a 2-1 decision, that the CFPB’s leadership structure is unconstitutional, declaring that the director must be removable “at will” by the President. The CFPB then filed a petition asking the full Court of Appeals to rehear the case en banc.  On November 30, 2016, CAC filed an amici curiae brief in support of the CFPB’s petition for rehearing on behalf of current and former members of Congress who were sponsors of the Dodd-Frank legislation. Our brief argued that en banc review was warranted because the panel restructured a government agency in a way that directly conflicted with Congress’s legislative plan. It also argued that review was appropriate because the panel’s opinion was at odds with the text and history of the Constitution, as well as with longstanding Supreme Court precedent. In February 2017, the D.C. Circuit granted the CFPB’s petition for rehearing en banc, vacating the panel judgment.

While the D.C. Circuit was considering whether to rehear the case en banc, it became clear that the new presidential administration was planning to withdraw support for the CFPB’s position and might force the Bureau to stop defending its own constitutionality—a development that could have prevented any review of the panel’s decision. On January 26, 2017, CAC filed a motion for leave to intervene on behalf of Senator Sherrod Brown and Representative Maxine Waters, Ranking Members of the Senate Banking Committee and House Financial Services Committee, respectively. Our motion argued that Sen. Brown and Rep. Waters should be permitted to intervene given that their interest in a defense of the Bureau’s constitutionality would not be adequately represented by the new administration. This motion and a subsequent motion for en banc reconsideration were denied, as were the motions and subsequent en banc reconsideration motions of other putative intervenors. At present, however, the new administration has not prevented the CFPB from defending itself before the en banc D.C. Circuit, and CAC has continued to support the Bureau by filing, on March 31, 2017, an amicus brief before the en banc court on behalf of current and former members of Congress.

This brief makes three principal points.  First, our brief argues that the Constitution gives Congress broad power to shape the structure of federal agencies and to give their leaders a degree of independence from presidential control. As we explain, the Framers deliberately provided such flexibility to Congress so that future lawmakers could respond effectively to new and unforeseen national crises. Second, it describes how Congress exercised this discretion after the devastating financial crisis of 2008, making a considered decision that an independent Bureau led by a single director could best combat the types of consumer financial abuses that caused the near-collapse of the American economy. Third, and finally, our brief argues that Congress had every right to make this choice: the Supreme Court has long recognized that the heads of regulatory agencies may be shielded from removal at will, and the CFPB is materially indistinguishable from the agencies addressed in the Court’s prior decisions. Thus, the Bureau’s leadership structure is constitutional.

The court will hear oral argument on May 24, 2017.

Briefs filed by CAC