You are here

CEI General Counsel Says Time to Invalidate ‘Fundamentally Unconstitutional’ CFPB

News Releases

A lawsuit challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB) will be heard in federal court this Wednesday. Mortgage lender PHH Corp. brought the legal challenge to the CFPB’s structure following a 2014 enforcement proceeding against PHH in which the CFPB imposed a $109 million in fines against the company. PHH argues, in part, that the CFPB chairman, Richard Cordray, wields vast but unchecked powers. CEI has a separate, pending lawsuit challenging the constitutionality of the CFPB, State National Bank of Big Spring v. CFPB. About the upcoming Wednesday oral argument in the PHH case, CEI general counsel Sam Kazman said the following:

The hearing involves fundamental issues about the basic structure of our government. As we've argued in our own pending constitutional challenge, the CFPB is a tremendously powerful agency that has a totally unprecedented structure. The appeals court panel in the PHH case took the same view, and now the Department of Justice itself has switched positions and agrees with that view as well. We hope that the en banc court will conclude that the CFPB is so fundamentally unconstitutional that it must be invalidated in its entirety.

In a related blog analysis, CEI attorney Hans Bader explains why the CFPB is wrong to claim the President’s inability to fire the CFPB’s head at will is akin to his inability to fire the commissioners of multimember agencies at will.

The usual rule under our Constitution is that the president can fire department heads at will, as the Supreme Court made clear in its Myers v. U.S. decision of 1926, which struck down a contrary law. An exception to this rule covers multimember agencies with a “quasi-legislative, quasi-judicial” role. But that exception doesn’t cover the CFPB, which is headed by a single leader not subject to collegial oversight. > Powerful Officials, Like the Director of the CFPB, Should Be Democratically Accountable

Related resources: