The Department of Justice has weighed in on the lawsuit filed by PHH Corp. against the Consumer Financial Protection Bureau. At issue is the constitutionality of the bureau’s structure.
In October,
a three-judge panel at the U.S. Court of Appeals for the District of Columbia ruled in favor of PHH. The court found the bureau’s sole director structure to be unconstitutional.
Then the CFPB filed a petition appealing the court’s initial decision. That petition was granted last month. In addition, the appeals court vacated the October ruling.
The Justice Department Friday filed a friend-of-the-court brief in the case challenging the constitutionality of the CFPB’s structure.
Joseph Lynyak III, a partner at Dorsey & Whitney LLP, explained that the Justice Department is arguing that an independent agency with one sole individual at its head who can only be removed for cause is unconstitutional. It is arguing that the exception permitted by the Supreme Court for independent agencies with a commission form of governance should not be extended to agencies with only one agency head.
“Unlike the legal position taken by PHH (which strongly argues that nothing can correct the constitutional defects inherent in the structure of the CFPB), the Department of Justice argues in its brief that the remedy adopted by the three-judge panel (i.e., striking the ‘for cause’ provision and allowing the president to fire the director of the CFPB without cause) is correct,” he explained. “Importantly, this remedy was the focal point of a Supreme Court case written by the chief justice in 2010.”
Lynyak added that
while the Justice Department concedes that the PHH case could be decided without addressing the constitutional issues, it correctly noted that at some point in the immediate future the constitutionality of the CFPB will have to be addressed.
