Federal judge reaffirms doubts about CFPB’s constitutionality

Brett Kavanaugh, the judge who issued a ruling in October declaring the CFPB’s structure unconstitutional, reiterated his doubts about the agency’s legitimacy in a recent dissent.

In October of 2016, Brett Kavanaugh, a judge on the U.S. Court of Appeals for the D.C. Circuit, issued a ruling that declared the structure of the Consumer Financial Protection Bureau unconstitutional. In that case, PHH v. CFPB, the court held that the bureau’s single director, removable only for cause, gave the bureau “massive, unchecked” power. The CFPB appealed this decision, requesting an en banc hearing. That request was granted, and oral arguments are set for May.

Last week, Kavanaugh weighed in again on the issue. In a dissent issued for an unrelated case, Kavanaugh cited the panel’s earlier PHH decision. The case involves a company challenging the CFPB’s authority to name it publicly while it is under investigation. Though the majority deferred to the bureau in its opinion, Kavanaugh issued a dissent, arguing that the CFPB should not be allowed to bring an adverse action against a regulated entity while its constitutionality was under a serious challenge.

Kavanaugh notes in his dissent that in order to prevail on its request for an injunction against the CFPB’s action, the unnamed company must show both “a likelihood of success on the merits” when the case is adjudicated, as well as “irreparable harm” by the proposed action. Kavanaugh cites the PHH decision in claiming that the plaintiff is likely to prevail. “I believe that the CFPB’s structure is likely to be ruled unconstitutional, whether by this court sitting en banc or by the Supreme Court.”

“The public interest is not served by letting an unconstitutionally structured agency continue to operate until the constitutional flaw is fixed,” Kavanaugh wrote. “And in this circumstance, the equities favor the people whose liberties are being infringed, not the unconstitutionally structured agency.”

The CFPB argued that even if the PHH decision is upheld, the solution is simply to sever the statutory for-cause removal provision. In that scenario, the CFPB would continue to regulate the company as an executive agency rather than as an independent agency. Kavanaugh disagreed. “The CFPB’s analysis on this point is badly mistaken,” he said. Until the for-cause provision is actually severed as a matter of law, he argued, the plaintiff, and all regulated entities, will be regulated by “an unconstitutional agency.”

“What the company objects to is not merely regulation by the CFPB, but rather regulation by the CFPB in its current unconstitutional and unprecedented structure,” Kavanaugh wrote. “A preliminary injunction would alleviate that ongoing harm.”