March 29, 2017

Administration Sides with PHH in En Banc Appeal as DOJ and PHH File Briefs

2 min

The Consumer Financial Protection Bureau's (CFPB's or Bureau's) structure continues to be a source of debate and disagreement. The U.S. Department of Justice (DOJ) recently filed its amicus curiae brief with the D.C. Circuit in PHH Corp. v. CFPB, a closely watched case that we have been following. In its brief, the DOJ argued that the CFPB's "for-cause removal" should be severed from the Dodd-Frank Act, meaning that the CFPB director could be removed at will by the President. Although the government's brief does not go so far as to argue that the entire CFPB should be dismantled, its argument represents an about-face from the previous administration's views. In a footnote, the DOJ acknowledged that it had recently taken a contrary position in a separate (pre-election) case, but after "further considering the issue" DOJ has concluded that "the better view is that the [for-cause removal] provision is unconstitutional."

Notably, DOJ does not ask for the abolishment of the CFPB, as PHH has. Rather, DOJ indicates that the rescission of the CFPB director's for-cause removal provision is a sufficient remedy. In arguing for the agency's dissolution, PHH focuses on structural issues in addition to the difficulties in removing its director, including the single-director framework (as opposed to a commission) and the Bureau's budgetary authority.

DOJ also noted that it is taking "no position" on the statutory issues in this case, which include an interpretation of the Real Estate Settlement Procedures Act. Finally, DOJ argued that the D.C. Circuit's upcoming decision in Lucia v. SEC – which asks whether the SEC's administrative law judges are employees or "inferior officers" and is scheduled for oral arguments on the same day in May as PHH – should not affect the outcome in PHH and would only serve as an independent ground to decide PHH.

As the parties and amici brief these issues in PHH, the House Financial Services Subcommittee on Oversight and Investigations heard testimony at a hearing titled "The Bureau of Consumer Financial Protection's Unconstitutional Design." The Subcommittee heard testimony regarding the CFPB's leadership structure, for-cause removal, and funding issues.

In PHH, the parties' briefing schedule is set to conclude on April 10, and the en banc panel is scheduled to hear oral arguments on May 24. Lucia v. SEC, which has become interlinked with the questions before the panel in PHH, will also be heard on May 24, followed by PHH.