IF THE SHIELD AGAINST AT-WILL TERMINATION OF THE CFPB’S DIRECTOR IS UNCONSTITUTIONAL, WHAT NEXT?
The U.S. Supreme Court has already agreed to consider in the matter of Seila Law v. CFPB whether the for-cause requirement for the President’s dismissal of the Consumer Financial Protection Bureau’s (“CFPB”) director is unconstitutional as a violation of the separation of powers. Now the Court is being asked by All American Check Cashing to review the same issue but with a twist: if that for-cause termination requirement is unconstitutional, must all of the CFPB’s enforcement actions therefore be dismissed? For the CFPB, the Department of Justice (“DOJ”), and the White House, this raises the old adage, “be careful for what you wish for” – it might result in unintended consequences. Clearly, if the Court agrees to take up All American’s request, it could result in a finding that the CFPB’s unconstitutional nature means that its current as well as past enforcement actions, settlements, etc. must be dismissed, reversed, and rescinded.
The hook in All American’s request for certiorari is it that the review it seeks may take the Court beyond the analysis and determination that it may issue in Seila Law. The CFPB and the DOJ have submitted their arguments against taking up All American’s challenge, which is still pending in the Fifth Circuit, and assert that a CFPB enforcement action can proceed so long as an official who is properly accountable to the President approves it. In fact, they argue that “[t]he few reasoned decisions that address related issues are in accord: A separation-of-powers problem with an agency does not compel invalidation of the agency’s actions if those actions are subsequently approved in compliance with separation-of-powers requirements.” But All American argued in its September brief that this kind of line edit is not allowed and would not do anything to fix its “past injury” of having been sued by an unconstitutional agency. All American professes “[t]hat core injury requires …dismissal of the action.”
The Trump Administration has also urged the high court not to hear an appeal in a lawsuit where a similar constitutional challenge has been raised against the Federal Housing Finance Agency (“FHFA”), whose single director also enjoys for-cause removal protection. The plaintiff/appellant investors in Fannie Mae and Freddie Mac are upset that the Fifth Circuit declined earlier this year to invalidate the FHFA’s controversial “net worth sweep” of the two mortgage giants despite reaching the conclusion that the FHFA was unconstitutionally structured. DOJ’s lawyers urged the Justices last month to let the appeals court’s rulings on constitutionality and remedies stand.
If the Supreme Court takes up All American’s bid, it would seem that at least four of the Justices have concerns about the viability of pending actions by the CFPB, if not also the agency’s prior actions, should the Court find that the for-cause requirement or the CFPB’s single director structure is unconstitutional. We will be keeping an close eye on the Court’s decision and will report on it as soon as it comes out.