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DC Circuit Strips CFPB of Its Independence, Vacates Enforcement Order Against PHH
17 October 2016
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The DC Circuit in a divided opinion found the single-Director structure of the Consumer Financial Protection Bureau to violate separation of powers principles; as a remedy the Court severed the statutory for-cause removal provision concerning the Director, enabling the President to remove the Director at will.
The decision also stands as a rebuke of the Bureau's aggressive enforcement positions and the concept of regulation by enforcement; the Court unanimously held the Bureau violated due process by retroactively applying new statutory interpretations against PHH and rejected the Bureau's position that no statute of limitations applies in its administrative proceedings.
The decision is unlikely to be the final word on the constitutionality of the Bureau. However, it may embolden financial firms to challenge CFPB enforcement actions.
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