New Supreme Court Justice Brett Kavanaugh has ruled that the Consumer Financial Protection Bureau in its current form is unconstitutional.
In 2016, PHH, a mortgage lender, challenged CFPB Director Richard Cordray’s $103 million increase to a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks.
To combat this fine, PHH brought a case against the CFPB, challenging Cordray’s authority to levy the additional fine and the constitutionality of the CFPB, and after much deliberation, the court agreed with PHH on all counts.
This decision was made by three justices of the U.S. Court of Appeals for the District of Columbia, with Kavanaugh writing the court’s decision. The 2016 case dealt with how much power the agency’s director held.
In Kavanaugh’s mind, the director of the CFPB is the “single most powerful official in the entire U.S. Government, other than the President,” in terms of unilateral power.
“As an independent agency with just a single Director, the CFPB represents a sharp break from historical practice, lacks the critical internal check on arbitrary decision making, and poses a far greater threat to individual liberty than does a multi-member independent agency,” Kavanaugh wrote in his decision. “All of that raises grave constitutional doubts about the CFPB’s single-Director structure.”
He continued. “By ‘unilateral power,’ we mean power that is not checked by the President or by other colleagues,” Kavanaugh wrote. “Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power. That is not an overstatement.”
But the CFPB fought back against the ruling, bringing it to the full Court of Appeals to rehear the case. When former CFPB Director Richard Cordray left the bureau, Acting Director Mick Mulvaney changed the bureau’s tune, asking the court to declare his own agency’s structure unconstitutional.
But, earlier this year, the full Court of Appeals handed down its ruling, declaring the CFPB to be constitutionally structured and that the director is removable only for cause.
PHH could have taken challenge to the CFPB structure to the Supreme Court, but chose not to, after the Court of Appeals vacated the $100+ million fine against the lender.
The CFPB, under Mulvaney, gave up its pursuit of the matter, and thus endeth that affair.
But with Kavanaugh in tow, could other challenges to the CFPB be coming? They already are.
Back in June, U.S. District Judge Loretta Preska of the New York Southern District declared the CFPB to be unconstitutionally structured for different reasons.
Could that case end up working its way all the way up to the Supreme Court? It’s certainly possible, considering that Preska’s decision goes directly against a decision of a higher court.
So, could this case (or another one like it) lead to the CFPB having to argue for its structure or very existence before the Supreme Court? It’s certainly much more possible than it was one week ago. And if that does happen, Justice Kavanaugh will likely vote to kneecap the bureau (or worse).
It won’t help that the CFPB certainly won’t be vociferous in its own defense anymore, considering who’s running the place now.
Add that all up and you have a bad mix for the CFPB.
That sound you hear? That’s the death clock on the CFPB moving a little bit closer to midnight.