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Federal Appeals Court Rules CFPB Structure Unconstitutional

On Tuesday, a federal appeals court ruled that the structure of the Consumer Financial Protection Bureau is unconstitutional. The appellant court’s main issue is the bureau’s single-director structure.

by Staff
October 11, 2016
2 min to read


WASHINGTON, D.C. — On Tuesday, a federal appeals court ruled that the structure of the Consumer Financial Protection Bureau is unconstitutional. The appellant court’s main issue is the bureau’s single-director structure, noting in its majority opinion that CFPB Director Richard Cordray "possesses enormous power over American business, American consumers, and the overall U.S. economy.”

The U.S. Court of Appeals for the District of Columbia Circuit stopped short of calling for the CFPB to be shut down in its 2-1 ruling. Instead, it ruled that the president will now have the authority to remove the director of the CFPB at will. Currently, the CFPB director can only be removed by the president for cause.

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“To remedy the constitutional flaw, we follow the Supreme Court’s precedents … and simply sever the statute’s unconstitutional for-cause provision from the remainder of the statute,” wrote Judge Brett Kavanaugh in court’s 110-page majority opinion. “With the for-cause provision severed, the President now will have the power to remove the director at will, and to supervise and direct the director. The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury.”

The case came about after the bureau fined mortgage lender PHH Corp. for allegedly accepting kickbacks from mortgage insurers. The lender appealed the fine, which led to Tuesday’s decision. And as part of that ruling, the federal appeals court threw out the bureau’s $109 million fine against PHH Corp.

To read the full story, click here to read a report from The Washington Post.

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