Did a Federal Judge Just Kill the Consumer Financial Protection Bureau?

Elizabeth Warren’s monster, the Consumer Financial Protection Bureau (CFPB), has had a couple of close calls with extinction. In October 2016, a three-judge panel of the DC Circuit ruled the structure unconstitutional for a very good reason: it is. The way it is established it combines the authority to make what amounts to laws, enforce the laws, and adjudicate cases under those laws. The agency is free from Congressional oversight and it doesn’t even get its appropriation from Congress, it simply draws from the Federal Reserve whatever sum it desires. In January 2018, the DC circuit sitting en banc reversed the panel. But, as Jonathan Adler at Volokh Conspiracy writes:


In my view, Supreme Court review of the underlying question will come relativey soon, and the D.C. Circuit’s decision is unlikely to prevail. Recent Supreme Court decisions, such as that in Free Enterprise Fund, suggest a majoirty of justices on the Court would like to contain precedents such as Humphrey’s Exectuor and are unlikely to bless the CFPB’s unique structure. If I am right, this means a mjaority of the Court is likely to embrace the position adopted by Judge Kavanaugh or Judge Griffith, not that laid out by Judge Pillard. Time will tell — and we will need time to thoroughly review the D.C. Circuit’s latest handiwork.

Earlier today, a federal judge for the Southern District of New York also concluded the CFPB is unconstitutional, below is from page 103.

In reaching the question of the constitutionality of Title X of Dodd-Frank, which established the CFPB as an “independent bureau” within the Federal Reserve System, 12 U.S.C. § 5491(a), the Court acknowledges the en banc holding of the Court of Appeals for the District of Columbia Circuit in PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. 2018), upholding the statute. Of course, that decision is not binding on this Court.7

Respectfully, the Court disagrees with the holding of the en banc court and instead adopts Sections I-IV of Judge Brett Kavanaugh’s dissent (joined in by Senior Circuit Judge A. Raymond Randolph), where, based on considerations of history, liberty, and presidential authority, Judge Kavanaugh concluded that the CFPB “is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director.” Id. at 198.

Also most respectfully, the Court disagrees with Section V of Judge Kavanaugh’s opinion wherein he determined the remedy to be to “invalidate and sever the for-cause removal provision and hold that the Director of the CFPB may be supervised, directed, and removed at will by the President.” Id. at 200. Instead, the Court adopts Section II of Judge Karen LeCraft Henderson’s dissent wherein she opined that “the presumption of severability is rebutted here. A severability clause ‘does not give the court power to amend’ a statute. Nor is it a license to cut out the ‘heart’ of a statute. Because section 5491(c)(3) is at the heart of Title X [Dodd Frank], I would strike Title X in its entirety.” Id. at 163-64 (citations omitted).


What Judge Preska is saying is that not only is the structure broken, but it is not her job to untangle constitutional and unconstitutional parts so she is declaring the entire agency to be unconstitutional.

Next up is a real gut check for Donald Trump and Mick Mulvaney. Will they do the right thing and repeat the case they made to the DC Circuit, that is, that the CFPB should be dragged out into the street and shot dead? Or have they become attached to it and will try to save it?

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