Appeals Court: Consumer Financial Protection Bureau's structure unconstitutional

The U.S. Court of Appeals for the D.C. Circuit has ruled that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional and subject to “abuse of power,” echoing complaints Republicans have been making about the bureau for five years. From Reuters:


A federal appeals court on Tuesday declared the U.S. Consumer Financial Protection Bureau’s structure unconstitutional because too much power is vested with its sole director, but said it can continue operating under the president’s supervision…

In the ruling, U.S. Circuit Judge Brett Kavanaugh said unlike other independent agencies not accountable to the president whose leaders are instead checked by commissions, the CFPB had a “novel” structure in which a single person headed it.

Kavanaugh wrote that the structure “poses a far greater risk of arbitrary decision making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.”

The CFPB had a single leader rather than a governing board. The Appeals Court ruled that individual was not sufficiently accountable to the president but did not shut down the CFPB. Instead it placed the CFPB under the direct supervision of the president. From the Hill:

“With the for-cause provision severed, the President now will have the power to remove the director at will and to supervise and direct the director,” Judge Brett Kavanaugh said in the court’s 110-page opinion.

“The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury.”


The court’s ruling also tossed out a penalty the bureau had previously handed out to mortgage lender PHH Corporation. CFPB had fined PHH Corp. $109 million dollars for an alleged kickback scheme.

Republicans have been arguing the CFPB was improperly structured for more than five years. Here’s an NPR story noting those complains from July 2011, the week the CFPB opened its doors:

Earlier this week, President Obama nominated Richard Cordray for the job. That same day, Senate Minority Leader Mitch McConnell (R-KY) took to the Senate floor with a message for the president.

“I would remind him that Senate Republicans still aren’t interested in approving anyone to the position until the president agrees to make this massive new government bureaucracy more accountable and transparent to the American people,” McConnell said.

The House is scheduled to vote Thursday on a GOP-backed bill that would restructure the consumer bureau to a form favored by the financial services industry. Among the changes, it would replace the director with a board of directors.

Naturally, when Republicans said there was a problem with the structure of the CFPB 5 years ago it was framed by NPR not as a legitimate question but as the GOP carrying water for the financial services industry. I don’t suppose NPR will be implying the same thing about the U.S. Court of Appeals now that they’ve said the bureau’s structure was unconstitutional and subject to abuse of power.


The Consumer Financial Protection Bureau was created as part of the 2010 Dodd-Frank law. It was the brainchild of Elizabeth Warren who would have become the bureau’s first director if not for Republican opposition. She later went on to become a Senator from Massachusetts.

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David Strom 4:30 PM | May 28, 2024