October 12, 2016

Court says CFPB's single-director structure unconstitutional

In a 2-1 ruling, the U.S. Court of Appeals for the D.C. Circuit said Tuesday that CFPB's structure is unconstitutional because it is headed by a single director rather than a multi-member board.

However, the court did not shut down the bureau, allowing it to operate as a regular executive agency for the time being, which gives the president the power to remove and supervise the director.

"NAFCU urges an immediate moratorium at the CFPB on any rulemaking not already implemented. The bureau should also consider ceasing and desisting all rulemakings until the legality is resolved," said NAFCU President and CEO Dan Berger.

"Because the CFPB is an independent agency headed by a single director and not by a multi-member commission, the director of the CFPB possesses more unilateral authority – that is, authority to take action on one's own, subject to no check – than any single commissioner or board member in any other independent agency in the U.S. Government," the court decision said.

NAFCU was the only financial services trade association to oppose subjecting credit unions to CFPB authority under Dodd-Frank. The association also supports pending legislation that would move the bureau from a single director to a five-person commission.