CFPB argues civil liberties irrelevant to PHH case

In its brief, the CFPB argues that under binding precedent, the only relevant question to determining the constitutionality of an agency’s structure is whether or not that structure is “of such a nature that it will impede the President’s ability to perform his constitutional duty…to take care that the laws are faithfully executed” (emphasis in the original).

Last week, the Consumer Financial Protection Bureau filed a brief with the DC Circuit Court in its ongoing legal battle with PHH. The Court had requested that the parties submit briefs addressing four key questions, one of which was the constitutionality of the bureau’s leadership structure. The CFPB’s brief, which can be found here, asserts that questions of civil liberties are irrelevant to the discussion of the bureau’s constitutionality.

Unlike other independent federal agencies which are governed by a commission, the CFPB is governed by a single director, who can only be removed from office for cause. The Dodd-Frank Act set out this structure in hopes of insulating the bureau from party politics. PHH argues that the structure actually insulates the bureau from control by the President, making it difficult for him to correct any actions that might infringe upon the individual liberties of citizens.

In its brief, the CFPB argues that under binding precedent, the only relevant question to determining the constitutionality of an agency’s structure is whether or not that structure is “of such a nature that it will impede the President’s ability to perform his constitutional duty…to take care that the laws are faithfully executed” (emphasis in the original). The bureau insists that the circuit panel erred in undertaking “an additional inquiry” into whether an agency’s structure somehow threatens individual liberty. The CFPB argues that the commission and single-director structures are “indistinguishable” from a constitutional perspective.

However, PHH notes that even the CFPB acknowledges that its structure is “a departure from tradition.” Their brief claims that the precedent cited by the CFPB pertains only to traditional structures, and that new structures require a new legal analysis. For example, PHH points to the Federal Trade Commission. The FTC is governed by a panel of five, and no more than three can be of the same political party. PHH argues that this requires the panel to hear the concerns of a broader range of stakeholders, thereby minimizing the threat to civil liberties.

At its core, PHH argues that the case presents a separation of powers issue that touches directly upon individual liberties. In recent testimony before a Senate sub-committee, PHH’s lead attorney quoted James Madison, saying that the consolidation of executive, judicial, and legislative power in one person is the “very definition of tyranny.”

Several CFPB supporters also filed briefs last week. One was filed by 40 current and former Democratic federal lawmakers. Oral arguments will be heard by the Court on May 24.

Fredrikson & Byron Law