Consumer Finance Insights
May 21, 2019

Ninth Circuit Holds CFPB Single-Director Structure Constitutional

On May 6, 2019, the Ninth Circuit Court of Appeals upheld the constitutionality of the Consumer Financial Protection Bureau (CFPB) in CFPB v. Seila Law LLC, No. 7-56324.

Seila Law LLC is a law firm that provides debt-relief services to consumers.  The CFPB filed a petition to force Seila Law to comply with a civil investigative demand (CID) it had issued to determine whether the firm had violated the Telemarketing Sales Rule.  The U.S. District Court for the Central District of California had ordered the firm to comply with the CID, rejecting Seila Law’s argument that the for-cause removal procedures applicable to the CFPB Director interfered with the President’s ability to exercise his executive power.  Seila Law appealed the decision.

In affirming, the Ninth Circuit relied heavily on U.S. Supreme Court precedent.  According to the Ninth Circuit, both Humphrey’s Executor v. U.S. and Morrison v. Olson together demonstrate that the CFPB’s structure is lawful and does not “impede the President’s ability” to faithfully execute the laws.  The court noted that a similar leadership structure was upheld in Humphrey’s Executor where the Supreme Court considered “the for-cause removal restriction at issue… a permissible means of ensuring that the FTC’s Commissioners would maintain an attitude of independence from the President’s control.”  The court also noted that the Supreme Court in Morrison upheld a “for cause” removal restriction “for an official exercising one of the most significant forms of executive authority.”

The Ninth Circuit also pointed to the recent D.C. Circuit en banc decision in PHH Corp. v. CFPB, 881 F.3d 75 (DC Cir. 2018), which also upheld the CFPB’s leadership structure.  In agreeing with the D.C. Circuit’s conclusion, the Ninth Circuit noted the constitutionality arguments had been “thoroughly canvassed” in that decision such that they did not need to “re-plow the same ground.”

There are currently two additional CFPB constitutionality challenges pending in both the Second Circuit (CFPB v. RD Legal Funding, 17-00890) and the Fifth Circuit (CFPB v. All American Check Cashing, No. 18-60302).  A decision in either of these circuits could create a circuit split, which could ultimately lead to the Supreme Court granting certiorari, if sought.