Banking and Finance Law Daily Supreme Court asked to consider constitutional challenges to structure of CFPB, FHFA
Wednesday, October 2, 2019

Supreme Court asked to consider constitutional challenges to structure of CFPB, FHFA

By Colleen M. Svelnis, J.D.

Two separate petitions have asked the Supreme Court to rule on the constitutionality of a federal agency with a single director, who may only be removed by the President for cause. The cases involve the CFPB and the FHFA.

Petitions for a writ of certiorari to the U.S. Supreme Court have been filed in two separate cases asking the court to consider the constitutionality of the Consumer Financial Protection Bureau and the Federal Housing Finance Agency—two federal agencies that are structured with a single Director. A payday lending company headquartered in Mississippi, All American Check Cashing, has filed a petition asking the Court to grant review of its constitutional challenge to the CFPB before the U.S. Court of Appeals for the Fifth Circuit issues its opinion in the case in All American Check Cashing, Inc. v. Consumer Financial Protection Bureau. The petition was filed before a decision has been granted in the Fifth Circuit.

petition for writ of certiorari has also been filed in Collins v. Mnuchin, also on appeal from the Fifth Circuit, asking the Court to determine whether the structure of the Federal Housing Finance Agency violates the separation of powers. In its decision in this case, the Fifth Circuit reaffirmed a 2018 decision that the FHFA’s structure violates constitutional separation of powers requirements, but it made no effort to imply anything about the CFPB’s organization (see Banking and Finance Law Daily, Sept. 9, 2019).

CFPB constitutionality. In 2010 the Consumer Financial Protection Act established the CFPB as an independent agency responsible for overseeing 18 consumer-protection statutes previously administered by other agencies. The CFPB is headed by a single Director who serves a five-year term and may not be removed by the President except "for inefficiency, neglect of duty, or malfeasance in office."

The case began when the Bureau brought an action against All American Check Cashing, Inc., alleging that it had engaged in unfair, deceptive, and abusive practices in its check cashing and payday lending business. The issue on appeal has been whether the single-director structure of the CFPB violates Article II of the Constitution and the Constitution’s separation of powers (see Banking and Finance Law Daily, April 20, 2018). The brief states that the President has no input on the CFPB’s funding, and that the Director may unilaterally request up to 12 percent of the Federal Reserve System’s annual operating budget to the CFPB for its sole use, which is not subject to review. All American’s petition asks whether the structure of the CFPB is constitutional in light of these statutory restrictions on the President’s power to remove the Director. The second issue stated in the petition is, if the structure is not constitutional, what would be the proper judicial remedy to redress the structural constitutional violation. The brief argues that the CFPB is an "unprecedented agency, combining sweeping unilateral executive, legislative, and judicial authority over a wide swath of the United States economy with unparalleled insulation from democratic accountability." The brief for All American argues that the Court must undo CFPB enforcement actions or even strike down the law that created the Bureau.

Constitutionality of FHFA. The Federal Housing Finance Agency was created in 2008 as an independent agency with "sweeping authority over the housing finance system." The FHFA is headed by a single Director who can only be removed for cause by the President, and it is exempt from the congressional appropriations process. The petition for Collins v. Mnuchin presents the question of whether the FHFA’s structure violates the separation of powers. The petition also asks whether the courts must set aside a final agency action that the FHFA took when it was unconstitutionally structured and strike down the statutory provisions that make the FHFA independent.

In its decision, the U.S. Court of Appeals for the Fifth Circuit reaffirmed a 2018 decision that the FHFA’s structure violates constitutional separation of powers requirements. However, there is a split in the circuit on this issue, which the petition asks the Court to resolve.

Supreme Court docket. For details about this and other petitions and cases pending before the Supreme Court, please consult this list of selected banking and finance law cases awaiting action in the 2019 term. Issued opinions, granted petitions, pending petitions, and denied petitions are listed separately, along with a summary of the questions presented and the status of each case.

Attorneys: Theodore Olson, Helgi C. Walker, Joshua S. Lipshutz, Lochlan F. Shelfer, Jeremy M. Christiansen (Gibson, Dunn & Crutcher, LLP) for All American Check Cashing, Inc.; Charles Flores (Beck Redden LLP), Charles J. Cooper, David H. Thompson, Peter A. Patterson, Brian W. Barnes (Cooper & Kirk) PLLC for Collins.

Companies: All American Check Cashing, Inc.; Mid-State Finance, Inc.; Thrifty Check Advance

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