Is the Consumer Finance Protection Bureau’s Structure Unconstitutional?

By Daniel Strellman*

On March 3, 2020,[i] the Supreme Court heard argument in the case of Seila Law v. Consumer Financial Protection Bureau.[ii] Two questions were certified: (1) “Whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers.”[iii] (2) “If the Consumer Financial Protection Bureau is found unconstitutional on the Basis of the Separation of Powers, can 12 U.S.C. §5491(C)(3) be severed from the Dodd-Frank Act?”[iv] This article focuses on the former question.

In the wake of the 2008 financial crisis, Congress passed the Dodd-Frank Act.[v] Included in that act was the Consumer Financial Protection Act (“CFPA”), the origination statute for the Consumer Financial Protection Bureau (“CFPB”).[vi] According to the CFPA, the CFPB is led by a single director, who must be appointed by the President and confirmed with the advice and consent of the Senate.[vii] So far, so good. However, the CFPB director “serves for a term of five years” and the “President may remove the Director for inefficiency, neglect of duty, or malfeasance in office.”[viii] In other words, the CFPB director has “for cause” removal protection, making the CFPB an “independent” agency. However, unlike the other independent agencies that have had for cause removal protections upheld,[ix] the CFPB has a unitary executive rather than an executive body made up of several commissioners. Thus, the CFPB’s structure is novel and open to challenge. Let’s dig into the case law regarding this separation of powers issue and see if we can make a prediction.

First, it is important for our analysis to demonstrate that the Director of the CFPB is clearly a principal officer, rather than an inferior offer or mere employee of the United States. The latter classes of federal employees are treated differently under the case law than the principles we will be utilizing to assess the constitutionality of the CFPB Director’s removal protections. The Appointments Clause states the following:

[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.[x]

The Supreme Court then defined “Officers” in Buckley v. Valeo:

We think that the term “Officers of the United States” as used in Art. II, defined to include “all persons who can be said to hold an office under the government,” is a term intended to have substantive meaning. We think its fair import is that any appointee exercising significant authority pursuant to the laws of the United States is an “Officer of the United States,” and must, therefore, be appointed in the manner prescribed by § 2, cl. 2, of that Article.[xi]

Finally, in Morrison v. Olson[xii] and Edmond v. United States,[xiii] the Supreme Court laid out how to distinguish between principal and inferior officers. In Edmond, the distinction lay in hierarchy:

If official X is directed or supervised by a principal officer (someone appointed by the President and confirmed by the Senate), then official X is an inferior officer. In Morrison, the distinction lay in the official’s authority: (i) whether official X is subject to removal by a higher official, (ii) the extent of the limits on official X’s duties and jurisdiction, and (iii) the temporary or ongoing nature of official X’s duties. Synthesizing the two approaches, it would appear that any officer directed or supervised by a principal officer is an inferior officer, and that even some officers not directed or supervised by a principal officer can still be inferior officers, if those officers can be removed by a superior, have limited duties or jurisdiction, and/or have temporary duties.

Here, the CFPB Director has no superior principal officer under the Edmond test and is not limited temporally, influentially, or by a superior’s removal power under the Morrison test. Thus, the CFPB Director is a principal officer, which is the role primarily discussed by the following cases regarding the permissible limits on the President’s removal power.

There are four principal cases regarding this issue. First, Myers v. United States struck down the 1867 Tenure of Office Act, which required the President to obtain Senate consent before removing particular executive officers.[xiv] The Court held that the President is expressly granted the right to appoint executive officers by the Constitution, the power of removal is intertwined with the presidential power of appointment rather than the Senate’s advice and consent power, and that this removal power is essential so that the President can “take care that the laws [are] faithfully executed.”[xv] Thus, the Tenure of Office Act was unconstitutional, and as a general rule, the President is unilaterally able to remove the executive officers she appoints.

Second, Humphrey’s Executor v. United States was the first case in which statutory restrictions on the President’s removal authority over an independent agency were upheld.[xvi] The question in Humphrey’s was whether a Federal Trade Commission (“FTC”) Commissioner was lawfully removed from office by President FDR without cause when the FTC’s origination statute granted commissioners for cause removal protections during their seven-year terms.[xvii] The Humphrey’s Court reinterpreted Myers as holding that the President has unencumbered removal power only for officers whose role is executive in nature, rather than quasi-legislative or quasi-judicial.[xviii] It then held that FTC commissioners’ roles were predominately quasi-legislative or quasi-judicial, and that “fair administration of the law” warranted this degree of independence and insulation from the President’s removal power.[xix]

Third, Bowsher v. Synar showed the outer boundaries of Congress’s ability to constrain the President’s removal power.[xx] Under the Balanced Budget and Emergency Deficit Control Act of 1985,[xxi] Congress gave itself sole removal power over the Comptroller General whose powers were executive in nature, not ministerial or mechanical (nor quasi-legislative or quasi-judicial).[xxii] The court held that by placing the responsibility for execution of the Act in the hands of an officer who is subject to removal only by Congress, Congress retains control over the execution of those executive tasks and encroaches on the President’s executive power in violation of the Constitution.[xxiii] Thus, the Court held that the President’s removal of officers cannot be constrained by Congress if the position is exercising executive power, rather than quasi-legislative or quasi-judicial power, as in an independent agency. In these cases, Congress can rely on its impeachment power alone.

 Fourth, and last, in Morrison v. Olson (the same case analyzed with regard to inferior officers above), the Court synthesized the holdings from the three prior cases:

The analysis contained in our removal cases is designed not to define rigid categories of those officials who may or may not be removed at will by the President, but to ensure that Congress does not interfere with the President’s exercise of the “executive power” and his constitutionally appointed duty to “take care that the laws be faithfully executed” under Article II. … [T]he real question is whether the removal restrictions are of such a nature that they impede the President’s ability to perform his constitutional duty, and the functions of the officials in question must be analyzed in that light.[xxiv]

Now that we are armed with all of the case law, we can analyze the situation with the CFPB. The anti-encroachment rule under Bowsher and Myers makes clear that removal cannot be constrained by Congress if the officer primarily exercises executive power. However, here we have an independent agency in the CFPB that primarily exercises quasi-legislative and quasi-judicial power. Humprey’s Executor implies that the CFPB structure may be permissible for that reason, yet it is important to note that Humprey’s only upheld an independent agency with a group of leaders, the FTC, rather than one with a single leader like the CFPB. That concern brings us full circle to Morrison, whose anti-hindrance rule suggests that we should ask whether the President’s duty to take care that the laws are faithfully executed is impeded. It seems as though the President’s duty to take care would not be impeded by the exercise of quasi-legislative and quasi-judicial power by the CFPB Director.

The discussion would end here if not for judicial realism. The truth is that the Supreme Court would not have granted certiorari in Selia Law v. CFPB or certified the issue of what the remedy should be if the agency’s structure is found to be unconstitutional if the Court did not disagree with the Courts below, who came to the same conclusions under the prior case law that I did. In particular, the fact that the strongest argument that the CFPB structure is unconstitutional came from a dissent penned by now-Justice, then-Judge Kavanaugh does not bode well for the CFPB Director’s removal protections. Then-Judge Kavanaugh argued that (1) “[n]ever before has an independent agency exercising substantial executive authority been headed by just one person[,]” (2) that the splintered leadership structure is essential prevent independent agencies from acting tyrannically toward individual liberty, and (3) that a President possesses far less influence over the single director than a commission because the President can select which commissioner is chairperson of the commission.[xxv]

Thus, despite what the prior case law would suggest, the jurisprudential affiliations of the justices may well result in the CFPB Director’s removal protections being struck down.

*Daniel Strellman is an Associate Editor on MJEAL. They can be reached via email at dstrell@umich.edu.


[i] No. 19-7, Supreme Court, https://www.supremecourt.gov/docket/docketfiles/html/public/19-7.html (last visited March 6, 2020).

[ii] Seila Law v. Consumer Fin. Prot. Bureau, ___ U.S. ___ (2020), cert. granted 140 S. Ct. 427 (2019).

[iii] 19-7 Seila Law LLC v. Consumer Financial Protection Bureau, Supreme Court, https://www.supremecourt.gov/qp/19-00007qp.pdf (last visited March 6, 2020).

[iv] Id.

[v] Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).

[vi] Consumer Financial Protection Act of 2010, Pub. L. No. 111–203, Title X, 124 Stat. 1955 (2010).

[vii] 12 U.S.C. § 5491(b) (West 2018).

[viii] 12 U.S.C. § 5491(c) (West 2018).

[ix] See, e.g., Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010).

[x] U.S. Const. art. II, § 2, cl. 2.

[xi] Buckley v. Valeo, 424 U.S. 1, 125 (1976) (per curiam).

[xii] 487 U.S. 654 (1988).

[xiii] 520 U.S. 651 (1997).

[xiv] 272 U.S. 52 (1926).

[xv] Id. at 122 (“The power of removal is incident to the power of appointment, not to the power of advising and consenting to appointment, and when the grant of the executive power is enforced by the express mandate to take care that the laws be faithfully executed, it emphasizes the necessity for including within the executive power as conferred the exclusive power of removal.”).

[xvi] 295 U.S. 602 (1935).

[xvii] See id. at 619.

[xviii] Id. at 626–32.

[xix] Id. at 624.

[xx] 478 U.S. 714 (1986).

[xxi] Balanced Budget and Emergency Deficit Control Act of 1985, Pub. L. No. 99–177, Title II, 99 Stat. 1038 (1985).

[xxii] 478 U.S. at 743–50.

[xxiii] Id. at 733–34.

[xxiv] Morrison, 487 U.S. at 689–90.

[xxv] PHH Corp. v. Consumer Fin. Prot. Bureau, 881 F.3d 75, 164–67 (D.C. Cir. 2018) (Kavanaugh, J., dissenting).

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