The Consumer Financial Protection Bureau (CFPB) has filed a petition for rehearing en banc asking the full US Court of Appeals for the District of Columbia Circuit to overturn a court panel’s decision in the much-watched PHH Corporation v. CFPB. In this case, the court held that the CFPB’s structure is unconstitutional and that its director is accordingly an Executive Branch appointee who serves at the president’s pleasure and not for a term of years subject to removal only for cause (as written in the authorizing language of Dodd-Frank, PHH Corporation v. CFPB).
As we have previously discussed, the court concluded that Congress unconstitutionally delegated Executive Branch power when it created an independent agency and authorized it to be headed by a unitary director subject to removal only for cause. However, the court found that the constitutional defect is cured, and the CFPB may continue operating by striking the “for cause” provision, thus subjecting the president to remove the director at will. But for this one change, the court held that the CFPB may continue operating as it has done.
In its petition, the CFPB argues that the court’s decision conflicts with prior US Supreme Court decisions that, the CFPB argues, hold that the Constitution permits Congress to limit the president’s authority to remove the heads of independent agencies. The CFPB also argues that the court’s decision overturning the CFPB’s determination that petitioner PHH Corporation violated the Real Estate Settlement Procedures Act (RESPA) misinterprets and misapplies RESPA’s substantive requirements.
The petition does not yet change the court’s ruling— for now, the president may remove the CFPB’s director at will, and the court’s RESPA holding still stands. As we have previously pointed out, Donald J. Trump’s election as president and continued Republican control of both the US Senate and House of Representatives may provide the new president with the authority to remake the CFPB as soon as he takes office in January 2017, at which time he could remove the incumbent director and effect some changes at the CFPB on the spot.
The CFPB’s petition has no set schedule for a ruling, and even if the petition is denied, the CFPB could seek review from the Supreme Court or request a stay in either court pending such a decision.