A group of 21 current and former Democratic lawmakers, including U.S. Sen. Elizabeth Warren and the House and Senate minority leaders, are backing the Consumer Financial Protection Bureau as it fights a court ruling that said the agency’s single-director structure is unconstitutional.
The Democrats, represented by Elizabeth Wydra of the Constitutional Accountability Center, want the full U.S. Court of Appeals for the D.C. Circuit to overturn a panel ruling that struck down the CFPB’s leadership design. In a proposed friend-of-the court brief filed late Tuesday, the Democrats urged the court to restore the agency’s structure.
Writing for the D.C. Circuit panel, Judge Brett Kavanaugh in October lambasted the “massive, unchecked power” afforded to the CFPB director. The agency’s leader, Kavanaugh wrote, “enjoys more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president.” The appeals court said the president must have the power to fire the CFPB director at will, rather than only for “inefficiency, neglect of duty, or malfeasance in office.”
The Democratic lawmakers contend the D.C. Circuit panel decision was driven more by a policy preference for bipartisan commissions—such as the U.S. Securities and Exchange Commission and the Federal Trade Commission—than any sound adherence to the law.
“The panel improperly elevated that policy judgment—one properly made by Congress—into a holding of constitutional law. That was plainly wrong, and consideration by the en banc court is thus warranted,” Wydra wrote in the brief.
When Congress created the CFPB as part of the Dodd-Frank financial reforms, Wydra wrote, lawmakers specifically shunned a commission structure that “could meaningfully hamper the CFPB’s effectiveness.”
The D.C. Circuit did not ask for and has not formally accepted the amicus brief from the Democratic lawmakers or any other groups, including one filed Tuesday from Americans for Financial Reform and the National Consumer Law Center.
Attorneys for PHH Corp., the mortgage company that successfully challenged the CFPB structure, said the D.C. Circuit, if the court allows the amicus submissions, should expect to receive filings from members of Congress who opposed the creation of the consumer agency. Gibson, Dunn & Crutcher’s Theodore Olson is lead counsel for PHH.
The Democratic lawmakers on the brief—including Senate Minority Leader Harry Reid of Nevada, House Minority Leader Nancy Pelosi of California and U.S. Sen. Sherrod Brown, D-Ohio, the ranking member of the Senate banking committee—were involved in drafting Dodd-Frank, a law that President-elect Donald Trump has said he wants to dismantle.
The proposed brief Tuesday from 10 nonprofit organizations—including Americans for Financial Reform and the National Consumer Law Center—raised questions about how the panel’s decision would affect Trump’s treatment of the CFPB upon taking office Jan. 20.
Some observers contend Trump would need to show cause to remove the CFPB’s director, Richard Cordray, while the agency’s appeal is pending. Others have argued Trump could immediately fire Cordray if, as president, he takes the position that the CFPB’s structure is unconstitutional. Either move could force Cordray to fight, in a new lawsuit, for his job.
“Because the decision comes on the eve of a presidential transition, it will also sow uncertainty about whether the new administration may replace the leadership of the CFPB and other single-director agencies, and possibly even uncertainty over who will control this litigation,” the organizations’ lawyers, including Deepak Gupta and Matthew Wessler of Washington’s Gupta Wessler, wrote.
The CFPB has defended itself in the case up to this point. The D.C. Circuit last week invited the U.S. Justice Department’s solicitor general’s office to file a brief expressing the views of the federal government.
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