As the Court of Appeals for the D.C. Circuit hears the Consumer Financial Protection Bureau's (CFPB or Bureau) en banc appeal of the PHH case, many are unsure of the current state of the CFPB's authority. Despite an initial decision that the CFPB's structure is unconstitutional, the agency continues to issue and obtain judicial enforcement of its Civil Investigative Demands (CIDs). Companies that have received a CID should take notice that the Bureau is still issuing CIDs and seeking to enforce them.
As you may recall, in PHH Corp., et al. v. CFPB, 15-1177 (D.C. Cir. 2016), a divided D.C. Circuit panel held that the CFPB was unconstitutionally structured because too much power is concentrated in a single director, who is removable only for cause. The D.C Circuit's panel decision remedied the constitutional defect by invalidating the provision that makes the director removable only for cause, thus allowing the President to remove the director at will. However, implementation of the PHH decision is stayed pending further appeal by the CFPB. On November 11, 2016, the CFPB petitioned for rehearing, and the case is now before the full D.C. Circuit en banc. Oral arguments were held on May 24, 2017.
But while PHH is on appeal, the Bureau continues to invoke its full power and authority to issue CIDs. The Bureau, however, now has to contend with another D.C. Circuit decision: CFPB v. ACICS. That decision, issued by the U.S. Court of Appeals on April 21, 2017, held that the Bureau's Notification of Purpose on the CID at issue in that case failed to meet the statutory notice requirements mandated by the Consumer Financial Protection Act.
But even before the ACICS decision, which has caused numerous CID recipients to challenge Bureau CIDs, PHH provided another avenue for legal challenge for parties receiving CIDs. For example, in January 2017, one company, Future Income Payments, LLC, argued in a lawsuit that it would be unconstitutional to allow the CFPB to enforce a CID against it. The complaint in John Doe Company v. CFPB, 1:17-cv-49 (D.D.C), alleges that the CFPB's single-director structure is unconstitutional and seeks to enjoin the Bureau from exercising any of the powers that Congress delegated to it. The Court, however, denied the plaintiff's motion for a temporary restraining order and preliminary injunction, stating that the "Plaintiff has failed to show that it is substantially likely to succeed in its pursuit of injunctive relief that would prevent the agency from taking any adverse action against [it]." Specifically, the Court held that "neither potential investigation by the CFPB nor the bringing of an enforcement action present irreparable injuries that the Court is willing to enjoin." The Court also noted that the Plaintiff did not produce any evidence that the President wishes to remove the director of the CFPB.
While the CFPB was concurrently litigating John Doe, the agency sought enforcement of the CID against the Plaintiff in a separate suit, CFPB v. Future Income Payments, LLC, No. 8:17-cv-00303 (C.D. Cal. 2017). In May, the Court in that case granted the CFPB's petition to enforce the CID. The Court here disagreed with the ruling in PHH, holding that the "for-cause" removal protection does not violate the constitution. Even if it did, the Court ruled, the CID would still be enforceable because the agency could still lawfully exercise its subpoena powers. To defeat enforcement of a CID based on the agency's structure, the Court held, the company "would have to show that only the Executive Branch can demand information from regulated businesses or take such investigative steps."
While Future Income Payments, LLC has appealed that decision to the Ninth Circuit, these cases show that the CFPB is not simply acting as a lame duck while PHH is on appeal.