May 07, 2019

Appeals court rules CFPB structure 'constitutional'

gavelThe U.S. Court of Appeals for the Ninth Circuit has ruled that the CFPB's single-director structure is constitutional. NAFCU has long advocated that the bureau's structure be reformed from a single director to a five-person, bipartisan commission.

There have been a number of lawsuits challenging the bureau's leadership structure as a potential violation of the Constitution's separation of powers. The Ninth Circuit cited a decision last year from the U.S. Court of Appeals for the D.C. Circuit sitting en banc, which upheld the bureau's constitutionality in another case brought by PHH Corp.

Although PHH Corp. declined to appeal the D.C. Circuit's ruling, there continues to be other challenges: The Fifth Circuit Court of Appeals heard oral arguments last month for a challenge to the bureau's constitutionality brought by defendants accused by the bureau in 2016 of engaging in unfair payday lending conduct; in March, the CFPB defended its structure before the U.S. Court of Appeals for the Second Circuit, arguing that Supreme Court precedent reinforces its constitutionality, and also that its structure "does not impede the president's ability to perform his constitutional duties."

However, earlier this year, the Supreme Court declined to hear a lawsuit challenging the bureau's structure.

Also of note, the Fifth Circuit in July determined that the Federal Housing Finance Agency's (FHFA) structure, which is also single director, is unconstitutional.

NAFCU is supportive of legislation to reform the bureau's governance structure to a bipartisan commission, as well as other reforms pursued by Congress.