By Lee P. Dunham, J.D.
In cases pending before the Ninth Circuit and a Utah district court, the Bureau filed notices that it will no longer argue for the constitutionality of the for-cause removal provision in the CFPA.
In cases pending before the Ninth Circuit and Utah district court, the Consumer Financial Protection Bureau has filed notices that it will no longer argue for the constitutionality of the for-cause removal provision of the Consumer Financial Protection Act (CFPA), 12 U.S.C. § 5491(c)(3). The Bureau previously submitted arguments supporting the constitutionality of the for-cause removal provision, which permits the President to remove the Bureau’s Director before the expiration of her term only for "inefficiency, neglect of duty, or malfeasance in office." In CFPB v. Cashcall, Inc., the Ninth Circuit had issued an order agreeing with the CFPB’s position. However, in its notices, the CFPB stated that it had reversed its prior position and would no longer defend the constitutionality of the provision.
In the two Ninth Circuit cases, Cashcall and CFPB v. Nationwide Biweekly Admin., Inc., the CFPB had previously argued in its briefs that the for cause removal provision is constitutional because it does not impede the President’s ability to perform his constitutional duties. The court agreed with that position in an order granting summary judgment against the defendants in Cashcall finding that the removal provision was constitutional. In its letters, the CFPB stated that its Director "has now determined that the for-cause removal provision is unconstitutional" and accordingly, the "Bureau will no longer defend the constitutionality of that provision in this Court or in any other." However, the Bureau indicated that it would continue to argue that the orders granting summary judgment against the defendants should be upheld on other grounds.
In the Utah case, CFPB v. Progrexion Marketing, Inc., the CFPB had previously argued for the constitutionality of the provision in its opposition to the defendants’ motion to dismiss. In its new filing, the Bureau stated that "although the Bureau now agrees that the for-cause removal provision in the CFPA is unconstitutional, the Bureau does not agree with Defendants that the Complaint should be dismissed," as the removal provision can instead be severed from the rest of the statute.
The notices come on the heels of the Justice Department’s filing in Seila Law LLC v. CFPB, a matter pending before the U.S. Supreme Court on appeal from the Ninth Circuit, indicating that the DOJ now believes that the CFPB’s structure violates the Constitution’s separation of powers requirements and that it will not defend the Dodd-Frank Act provisions (see Banking and Finance Law Daily, Sept. 18, 2019).
Companies: Cashcall, Inc.; Nationwide Biweekly Admin., Inc.; Progrexion Marketing, Inc.; Seila Law LLC
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