The long-running battle over the constitutionality of the CFPB is finally over, and it ended with a whimper. The resolution from the Supreme Court is, practically speaking, about where a panel of the D.C. Circuit left things years ago in PHH.
Companies defending against CFPB enforcement have repeatedly argued that the Bureau is unconstitutional because it has a single head (the Director) who is protected against removal except for cause, and also (the challengers have argued) has sweeping power over a broad swath of the economy. In PHH, then-Judge Kavanaugh wrote for the panel that the removal protection is unconstitutional, but that this restriction is severable from the rest of the statute. The result would have been a Bureau that looks largely the same, but with the President expressly able to remove the Director at will.
The en banc court reversed that conclusion. And litigants have disputed the issue ever since. It has, if nothing else, been a useful tool to prolong litigation. In the current case, for example, the challenger is resisting a CFPB civil investigative demand (similar to a subpoena).
Today, the Supreme Court decided that the for-cause removal protection is indeed unconstitutional. And the Chief Justice, joined by Justice Alito and now-Justice Kavanaugh, opined that this provision is severable.
This outcome is not, really, what Seila Law wanted. It does not stop the Bureau from investigating or taking enforcement action.
There is an outstanding question about whether past actions, taken before the Supreme Court invalidated the offending provision, are now void. Litigation on that front will continue in some cases. But there is a well-developed body of law for such situations, with concepts like ratification and de facto officers. It is fairly unlikely that Seila Law or other defendants or respondents will avoid liability on the basis that the Director under which past actions happened was not yet known to be removable at will.
Another interesting question may be whether the Bureau must submit to OIRA review of its regulations. The President can remove the Director at will, but the statute also says the Bureau is an “independent agency,” and the Court did not disturb that provision. This situation – a statutorily independent agency with a non-independent head – is unusual, and it is not clear what it will mean in practice.