Four months after a three-judge panel issued a 2-1 ruling that the structure of the Consumer Financial Protection Bureau is unconstitutional, the full Court of Appeals for the D.C. Circuit has agreed to rehear the issue.
In an order [PDF] released this afternoon, the judges of the D.C. Circuit (with former Supreme Court nominee, Chief Judge Merrick Garland not participating) set a March 10 deadline for the CFPB’s attorneys and the Bureau’s supporters to file their briefs. PHH Corporation, the mortgage insurer whose lawsuit is the underlying case in this appeal, will then have until March 31 to file its response. No date set on when the full en banc hearing will occur.
Today’s order vacates the Oct. 2016 ruling by the three-judge appellate panel, which held that the CFPB’s structure is unconstitutional because its sole Director, current Richard Cordray, can not be dismissed from his position by the President without first showing cause.
Writing for the two-judge majority at the time, Judge Brett Kavanaugh contended that independent agencies like the CFPB — which are part of the executive branch but which are not directly controlled via the White House cabinet — “collectively constitute, in effect, a headless fourth branch of the U.S. Government… They exercise enormous power over the economic and social life of the United States.”
Most independent agencies have one of two forms of leadership structures. One is the multi-member commission, where each of the commissioners has equal voting authority. The commissioners can not easily be fired, but the White House can determine which will be the chairperson.
The other typical structure involves a single director, but unlike the CFPB that individual can be removed from office at the President’s whim.
The two-judge majority held that — despite the fact that there is nothing in the Constitution about agency structure, and the law that created the CFPB specifically requires a sole Director — the inability to readily remove the Bureau’s Director put too much authority in the hands of one person.
The court had allowed the CFPB to continue operating, but with the understanding that the “for cause” requirement of the law be thrown out.
The CFPB appealed this ruling in November, arguing that the Supreme Court has previously plainly held that the President can “create independent agencies run by principal officers appointed by the President, whom the President may not remove at will but only for good cause,” and that “the Constitution did not give the President illimitable power of removal over the officers of independent agencies.”
The Bureau and its supporters pointed out that the CFPB is not alone in having a director who can not be dismissed at the President’s discretion. The Social Security Administration, the Federal Housing Finance Agency, and the Office of Special Counsel each have a similar structure. The earlier appellate ruling put those agencies’ structures in doubt, even though none of them were party to the underlying case.
President Trump recently signed an executive order requiring that federal agencies remove at least two existing regulations for each new rule put in place. However, that order only applies to agencies directly under the control of the cabinet, meaning independent agencies like the CFPB would not be forced to comply with this two-for-one mandate.
However, if the White House were able to remove Cordray before his term ends in 2018, whomever the administration names as a replacement might be more likely to comply with this executive order, regardless of any organizational obligation to do so.
While the CFPB is declining to comment on the pending litigation, a number of consumer advocacy and human rights groups are applauding the court’s decision to have a full rehearing of this case.
“If the 2008 financial crisis showed us anything, it’s that people need an independent regulator to look after the interests of consumers,” said Mike Calhoun, president of the Center for Responsible Lending. “We’ve already seen conservative members of Congress and their political allies attempt to weaken CFPB’s authority for meritless reasons, but Director Cordray has led the Bureau with a steady hand and worked tirelessly with his staff to return billions of dollars back to hardworking people across the country harmed by abusive financial practices.”
Hilary O. Shelton, director of the NAACP’s Washington Bureau, said today’s decision is the “right call,” and that the CFPB’s “current structure and leadership has helped millions of families across the country fight against abusive financial practices. The impact of unscrupulous and predatory financial services providers on the communities we serve and represent, which contributed immensely to the economic downturn of 2008, is well documented and continues to decimate our families and our neighborhoods.”
U.S. PIRG also weighed in on the decision, saying it’s pleased that the ruling against the CFPB’s “independent leadership will be reviewed by the full court.” That will give Cordray “the chance to finish out his term and continue being a consumer champion,” said Mike Landis, Litigation Director, U.S. PIRG.
“At the time of the D.C. Circuit decision, we said the ruling threatened the ability of the CFPB to be a tough protector of consumer interests,” said Robert Weissman, President, Public Citizen. “Today’s decision by the D.C. Circuit to review that earlier decision en banc gives hope that the earlier flawed decision will be reversed.”
The National Consumer Law Center called the CFPB a “powerful ally for consumers.”
“Critics attempting to build a case for the unprecedented removal of Richard Cordray as CFPB director are on thin legal ground, lack public support, and are carrying water for powerful special interests,” said NCLC Associate Director Lauren Saunders.
“Richard Cordray has been a fierce advocate for consumers and an effective leader of the CFPB,” said Laura MacCleery, Vice President of Policy and Mobilization for Consumer Reports. “Congress deliberately set up the CFPB with an independent director to help shield it from banking industry control. We appreciate the court’s willingness to carefully consider this issue and hope that it will affirm Congress’ original intent so that the CFPB will remain an effective watchdog for consumers.”
Today’s decision by the appeals court comes at the same time as members of Congress begin consideration of legislation that would repeal the Consumer Financial Protection Act of 2010, the very law that created the CFPB.

Editor's Note: This article originally appeared on Consumerist.