National Review has published my piece about the current kerfuffle about the CFPB. I do not opine on the statutory question about the intersection between Dodd-Frank and the Federal Vacancies Reform Act, other than to say the separation of powers, and not legislative history should provide the answer. The conclusion of the Op-Ed is the most important: how to bring the CFPB back within our constitutional order.
Last year, Judge Kavanaugh’s majority opinion found the CFPB’s structure was unconstitutional, but, with Judge Randolph, rewrote the statute to strike down the “for cause” removal provision. Judge Henderson, in partial dissent, would have ruled for for PHH on narrow, statutory grounds. The D.C. Circuit vacated that panel opinion, and the case is currently pending. In the event the majority of active judges rule adopts Judge Henderson’s statutory construction, PHH is put in a tough position. They have already received the relief they wanted–the vacatur of a significant fine imposed by the agency–and may not be willing to petition for certiorari. That outcome would leave the CFPB as an institution intact, and the Director would still be protected from at-will removal.
I propose an alternate solution that could resolve the issue altogether:
Once a permanent director of the CFPB is confirmed, however, he or she can settle the pending litigation about the scope of the agency’s authority. First, the CFPB should officially agree with Judge Kavanaugh and admit that the “for cause” provision in Dodd-Frank is unconstitutional. Second, the CFPB should acknowledge that there is risk inherent in litigating this position up to the Supreme Court — the entire agency could be declared invalid., not merely saved by rewriting the removal provision. Third, to avoid that risk, the director should agree that he or she can be removed at will by the president. Fourth, to settle the litigation, the CFPB should attest to this understanding in what is known as a consent decree. Fifth, the district court should approve that settlement, which would then be binding on all future CFPB directors. In other words, all future presidents would be able to fire the head of the CFPB for a good reason, a bad reason, or no reason at all, and future directors would be bound by the consent decree to accept their termination. With this stratagem, the most egregious aspect of the CFPB would be remedied, and the protection of consumer finance could be brought within our constitutional order.
If PHH is unwilling to appeal the case to the Supreme Court, the consent decree provides a different path to ensure the CFPB’s director can be removed at will.
I view this sort of consent decree in a similar light as the desegregation consent decrees. In those cases, school districts were bound by state laws that required them to segregate public schools. In light of Brown and follow-up litigation, the schools agreed to consent decrees, whereby they agree to stop enforcing the state’s segregation laws–whether they were repealed or not. Here too, even if Dodd-Frank is not modified, the CFPB branch can agree that it will no longer demand protection by the “for cause” provision. Granted, we have only a vacated circuit-court opinion, but it is one I am fairly confident the Court would concur with.
To make the point more explicitly, at the end of his tenure, the confirmed Director should let President Trump fire him, for no reason at all, to establish an executive branch practice. This sort of thing matters for the Court’s separation of powers analysis.
In any event, this entire kerfuffle over the CFTC is little more than a tempest-in-a-teapot, which will wind down once the next director is confirmed:
Perhaps the most unfortunate aspect of this ordeal is that once President Trump’s permanent CFPB nominee is confirmed, this tempest in a teapot runs out of steam. The controversy will be moot, and whatever case law might be developed during this interregnum will ultimately be vacated. Thousands of pages of briefing will be for naught. And that nullity is precisely what King Richard’s final act has wrought.