Our friends at the Washington Legal Foundation reported back in July 2011 that:
Answer: This government agency has undefined and vast powers placed in the hands of an unelected and unaccountable bureaucrat.
Question: What is the Consumer Financial Protection Bureau? ...
The bureau is an unelected, unaccountable government agency operating within the Federal Reserve. In fact, its funds are not even appropriated by Congress; instead, they receive their funding from the Federal Reserve itself drawn from its “excess” earned on assets that previously was returned directly to the Treasury. The law explicitly bars the Congress from reviewing the funding of the bureau under Section 1017 of Dodd-Frank.
There’s also the fact that unlike the SEC, FTC, Consumer Product Safety Commission, and most other government agencies with broad powers, the CFPB is not run by a commission. The director is incredibly powerful, with the ability to implement and enforce all consumer-related laws that relate to the financial industry and credit. The bureau has exclusive rule-making authority to which courts must defer in the interpretation of its own rules, which can only be overturned by a supermajority of the Financial Stability Oversight Council (FSOC, another unelected board, but at least composed of the heads of an alphabet soup of other agencies such as the SEC, CFTC, FHTA, OCC, FDIC, Federal Reserve, and NCIU, as well as the Treasury Secretary). So unless the FSOC (they love acronyms in D.C.) gets around to overturning the CFPB’s decision, it will likely stand because Dodd-Frank took away the power of judicial review from the courts. Article III of the Constitution is repeatedly violated throughout the financial reform bill.
Well, it turns out somebody in Washington still cares about the Constitution, because as the WSJ reports today:
A federal appeals court delivered a strong rebuke to the government’s new consumer-finance watchdog, declaring the agency’s unusual independence to be unconstitutional, and ordering its powers be curbed. ...
If it stands, the decision from the U.S. Court of Appeals for the District of Columbia would reduce the agency’s independence, empowering the White House to supervise the agency and remove its director, in contrast to the current arrangement where the director’s five-year term is intended to outlast a president’s. ...
In Tuesday’s ruling by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, Judge Brett Kavanaugh, a George W. Bush appointee, wrote that Congress gave the CFPB director “more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president.” He said the problem of checks and balances was particularly acute because the CFPB “possesses enormous power over American business, American consumers and the overall U.S. economy.”
The appeals court allowed the CFPB to continue operating as an agency but ordered a restructuring of how it operates in the executive branch.
Of course, as usual, the Obama administration plans a campaign of massive resistance:
“The bureau is considering options for seeking further review of the court’s decision,” a CFPB spokeswoman said, adding the ruling “will not dampen our efforts or affect our focus on the mission of the agency.”
In an op-ed that must have been sitting in his computer ready to go, Thomas Boyd opines that:
The federal Consumer Financial Protection Bureau wasn’t declared unconstitutional on Tuesday, as many conservatives had hoped. But a split decision from the U.S. Court of Appeals for the D.C. Circuit has put an important political check on the agency by making its director accountable to the White House. It was a partial victory for constitutional principles. ...
The Dodd-Frank legislation placed virtually all of the CFPB’s executive power in a single director, appointed to a five-year term by the president and confirmed by the Senate. This was a novel structure for a regulatory agency. Historically, independent federal agencies have been managed by multi-member commissions, often with bipartisan representation. For example the Federal Communications Commission and the Securities and Exchange Commission follow that pattern.
Even more troubling, the CFPB’s director was shielded from normal executive-branch checks and balances. The law specified that he could not be fired, not even by the president, and could be removed only for cause, defined in the statute as “inefficiency, neglect of duty, or malfeasance in office.” Advocates of the statute, including now-Sen. Elizabeth Warren (D., Mass.), wanted the bureau and its director to be immune from political oversight—by Congress or even by the president.
On Tuesday a panel of the U.S. Court of Appeals for the D.C. Circuit held that this structure is unconstitutional. “Other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power,” wrote Judge Brett Kavanaugh for the 2-1 majority. “That is not an overstatement.”
He added that this agency, led by a single director who cannot be fired, is “the first of its kind and a historical anomaly.” As such, the CFPB “lacks the critical internal check on arbitrary decision-making, and poses a far greater threat to individual liberty.” Judge Kavanaugh, joined by Judge A. Raymond Randolph, declared that the power vested in the agency’s director violated the Constitution’s Separation of Powers Doctrine.
In an editorial, the Journal itself comments that:
Some of us hoped the court would find the entire CFPB unconstitutional, but the ruling highlights again what a rush job Dodd-Frank was. Then professor and now Senator Elizabeth Warren proposed the consumer agency as a multi-member commission. So did the White House. But late in the game the bureau’s director became an unconstitutional authority unto himself. Ms. Warren sniffed in reaction to the ruling that it is merely a “technical tweak” that would be overturned on appeal, which shows how much contempt for the Constitution progressive elites now have.
If Congress won’t kill the CFPB, then it should at least make it conform to the normal constraints on independent federal agencies. And if Donald Trump wins, he should fire Mr. Cordray immediately.
Of course, the Democrats hope to appeal to the en banc DC Circuit, which is now dominated by Democrat appointees, who presumably are more inclined than their GOP counterparts to put Liz Warren's personal policy preferences ahead of the Constitution. But, at least for the moment, the rule of law prevailed.
