US Federal Court to Consider Constitutionality of Consumer Watchdog Agency

The final resolution of PHH Corp. v. CFPB—in which a panel of the US Court of Appeals for the DC Circuit held that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional (summary here)—will have substantial ramifications for companies across the consumer financial services industry. On February 16, 2017, this litigation took another twist as the court granted the CFPB’s petition (discussed here) for rehearing en banc, vacating the panel decision and setting up review by the full DC Circuit. In its order, the DC Circuit put the CFPB’s constitutionality squarely at issue, directing the parties to address the following questions:

1. Is the CFPB’s structure as a single-director independent agency consistent with Article II of the Constitution and, if not, is the proper remedy to sever the for-cause provision of the statute?
2. May the court appropriately avoid deciding that constitutional question given the panel’s ruling on the statutory issues in this case?
3. If the en banc court, which has today separately ordered en banc consideration of Lucia v. SEC, 832 F.3d 277 (D.C. Cir. 2016), concludes in Lucia v. SEC that the administrative law judge who handled that case was an inferior officer rather than an employee, what is the appropriate disposition of this case?

On March 10, PHH Corporation filed its brief, joined by the US Chamber of Commerce as amicus curiae. Represented by Mayer Brown lawyers, the US Chamber argued in its brief that the structure of the CFPB is unconstitutional and that businesses have suffered the consequence of this unconstitutional structure in the form of overreach by the CFPB and its unwillingness to follow the practices of other regulatory agencies. (The US Chamber of Commerce, again represented by Mayer Brown lawyers, also submitted a brief in the related Securities and Exchange Commission administrative law judge case).

On March 17, the US Department of Justice filed its own amicus brief with the DC Court of Appeals. This brief, too, was in support of PHH, not the CFPB. The CFPB’s brief will be due on March 31, with oral argument to follow on May 24. While the timing and content of the DC Circuit’s ultimate decision remain unknown, one thing is clear: everyone in the industry will be watching to see how the en banc court addresses the numerous important issues raised by this case.