Banking and Finance Law Daily House defends constitutionality of CFPB structure in amicus brief
Tuesday, October 8, 2019

House defends constitutionality of CFPB structure in amicus brief

By Donielle Tigay Stutland, J.D.

A debt resolution firm has filed a reply brief to assert that it is the right case to challenge the constitutionality of the CFPB, in light of a second petition for certiorari on this same issue, while the House of Representatives files an amicus curiae brief to defend the Bureau.

In the wake of Consumer Financial Protection Bureau Director Kathy Kraninger announcing in September that the agency would no longer defend the constitutionality of the CFPB Director’s for-cause removal provision, as well as a second case being petitioned to the Supreme Court questioning the agency’s constitutionality in early October, the U.S. House of Representatives has filed an amicus curiae brief in order to defend the constitutionality of the Bureau in a Supreme Court challenge. The challengers, Seila Law, LLC, a California debt resolution firm, have also filed a reply brief to assert that it is the proper case to adjudicate the issue, given that another firm filed its own writ last week.

Constitutional challenge. Although Seila Law, LLC had petitioned the Supreme Court in June 2019 to address the issue of whether the CFPB’s structure violates the separation of powers, the Supreme Court was presented with similar arguments in the first week of October 2019, from the payday lender All American Check Cashing, Inc. (Banking and Finance Law Daily, Oct. 2, 2019). All American had petitioned the Supreme Court asking the court to hear All American’s case instead of or in addition to the Seila case. All American argued that Seila’s petition does not present the question of an appropriate remedy; Seila’s reply brief contends that the Seila case argues both the constitutional and remedy questions.

Argued the lawyers for Seila, "Parties do not seek this Court’s review on constitutional questions for kicks; they do so in order to obtain meaningful relief. Accordingly, when the Court hears constitutional cases, it routinely proceeds to consider and decide the appropriate remedy upon finding a constitutional violation, regardless of whether the petition itself presented a separate remedial question."

Amicus brief. On October 4, the House filed an amicus brief in the Seila case. Although this motion was filed after the amicus brief deadline, the House argues that its motion should be granted given that it received notice the day before the deadline that the CFPB was going to change its position, and no longer defend the constitutionality of the CFPB Director’s for-cause removal provision. The motion drafted by counsel for the House argued that the issue is of significant importance. "The constitutionality of the for-cause removal protection that Congress enacted to provide the CFPB Director with a measure of independence, consistent with the agency’s functions as a financial regulator," the House’s attorneys wrote. The motion also argued that courts have recognized that in order to "shield" certain agencies, a degree of independence is needed. The motion noted that the President still maintains control over the agency, since the director may be removed for failing to enforce the nation’s consumer laws.

In a press release announcing the amicus brief filing, House Speaker Nancy Pelosi said, "As part of comprehensive Wall Street reform, Congress established an independent cop on the beat to protect seniors, servicemembers, veterans, college students, and all consumers in America against the abusive and predatory financial marketplace practices that led up to the Great Recession." She continued, "By not defending the Consumer Bureau’s independence, the Trump Administration is choosing special interests over America’s consumers. As the lower courts have recognized in upholding the constitutionality of the for-cause provision, ‘Congress established the independent CFPB to curb fraud and promote transparency in consumer loans, home mortgages, personal credit cards, and retail banking.’ In the grip of President Trump, we have already seen the Consumer Bureau abandon its mission to protect the American people from unfair and predatory conduct."

The amicus filing was authorized by the Bipartisan Legal Advisory Group.

Attorneys: Kannon K. Shanmugam (Paul, Weiss, Rifkind, Wharton & Garrison LLP) for Seila Law LLC. Noel J. Francisco, U.S. Department of Justice, for the CFPB.

Companies: Seila Law LLC

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