PHH Corp. v. Consumer Fin. Prot. Bureau - 426 U.S. App. D.C. 100, 839 F.3d 1 (2016)

Rule:

The Consumer Financial Protection Bureau (CFPB) is unconstitutionally structured because it is an independent agency headed by a single director.

Facts:

In the Dodd-Frank Act of 2010, Congress established a new independent agency, the Consumer Financial Protection Bureau (“CFPB”). The CFPB was headed by a single Director who possessed more unilateral authority, that is, authority to take action on one's own, subject to no check — than any single commissioner or board member in any other independent agency in the U.S. Government. At the same time, the Director of the CFPB possessed enormous power over American business, American consumers, and the overall U.S. economy. The Director was unilaterally enforcing 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The petitioner in the instant case, PHH Corp., was a mortgage lender and was the subject of a CFPB enforcement action that resulted in a $109 million order against it. In seeking to vacate the order, petitioner argued that the CFPB's status as an independent agency headed by a single Director violated Article II of the Constitution.

Issue:

Did the CFPB’s status as an independent agency headed by a single Director violate Article II of the Constitution? 

Answer:

Yes.

Conclusion:

The Court held that the Consumer Financial Protection Bureau (CFPB) was unconstitutionally structured under U.S. Const. art. II, § 1 because it was an independent agency headed by a single director. According to the Court, the CFPB's concentration of enormous executive power in a single, unaccountable, unchecked Director not only departed from settled historical practice, but also posed a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than did a multi-member independent agency. In order to remedy the constitutional flaw, the Court severed the unconstitutional for-cause provision, so that the president would have the power to remove the director at will and to supervise and direct the director. In light of the Court’s ruling on the constitutional issue, the Court granted PHH’s petition, vacated the CFPB's order against PHH, and remanded for further proceedings consistent with this opinion. On remand, the CFPB may determine among other things whether, within the applicable three-year statute of limitations, the relevant mortgage insurers paid more than reasonable market value to the PHH-affiliated reinsurer.