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5th Cir. Holds CFPB Structure is Constitutional

CFPB structureThe U.S. Court of Appeals for the Fifth Circuit recently held that the restrictions on the president’s removal authority under the Consumer Financial Protection Act, allowing for the removal of the CFPB’s director only for “inefficiency, neglect of duty, or malfeasance in office,” are valid and constitutional.

A copy of the opinion in Consumer Financial Protection Bureau v. All American Check Cashing, Inc. is available at:  Link to Opinion.

As you may recall, Congress created the Consumer Financial Protection Bureau in response to the 2008 financial crisis and tasked it with implementing and enforcing preexisting consumer-protection statutes. The CFPB is headed by a single director appointed for a five-year term by the president with the advice and consent of the Senate and removable by the president for “inefficiency, neglect of duty, or malfeasance in office.”

The CFPB filed a civil enforcement action against two payday lenders and their owner in the U.S. District Court for the Southern District of Mississippi.  The CFPB alleged that the payday lenders had engaged in unfair, deceptive, or abusive acts.

The payday lenders filed a motion to dismiss alleging that the CFPB is unconstitutionally structured, and as a result, any enforcement action it initiates is void from its inception.

In reviewing the payday lenders’ motion, the trial court examined the ruling of the U.S. Court of Appeals for the District of Columbia Circuit in PHH Corporation v. CFPB, 881 F.3d 75 (D.C. Cir. 2018), and denied the motion, holding that “the [CFPB] is not unconstitutional based on its single-director structure” and certified its order for interlocutory appeal.

The Fifth Circuit heard oral argument but withheld ruling pending the en banc court’s resolution of Collins v. Mnuchin, 938 F.3d 553 (5th Cir. 2019).

Collins held that the Federal Housing Finance Agency (FHFA) violated the Constitution’s separation of powers and is “too insulated from executive control because it is funded through annual assessments on the [government-sponsored entities (GSEs)], is free of any formal executive control, and is led by a single director removable only for cause.”

The Collins court distinguished PHH, noting that while the Executive Branch has no authority over the FHFA, it “can directly control the CFPB’s actions through the [Financial Stability Oversight Council] FSOC.”

The Fifth Circuit then heard a second round of oral argument where the payday lenders argued that the structure of the CFPB violates the separation of powers doctrine arguing that because the Bureau is led by a single director removable by the president only for cause, it denies the Executive Branch its due.

The Fifth Circuit found no support for this argument in constitutional text or in Supreme Court decisions and upheld the constitutionality of the CFPB’s structure.

The Fifth Circuit noted that the Supreme Court of the United States “has, without exception, upheld for-cause protection for officers so long as removal authority remains in the hands of the President or his at-will agent.” Further noting, the Supreme Court has struck down officer removal restrictions three times, “each where the removal power has been held by Congress or given to someone other than the President.”

The Court distinguished Collins where it found that the FHFA’s single-member leadership, in conjunction with for-cause removal protection and other features, unconstitutionally insulated the FHFA noting in the present matter the “FSOC’s veto provides the Executive Branch with ‘an emergency brake to hold the CFPB accountable,’ the Executive Branch holds no formal control over the FHFA.”

Finally, the Fifth Circuit concluded that “[t]he President can remove the CFPB Director only for ‘inefficiency, neglect of duty, or malfeasance in office,’ a broad standard repeatedly approved by the Supreme Court. That alone is enough to decide this case. If there is any threat of undue concentration of power, the Office of President is its beneficiary” finding “neither the text of the Constitution nor the Supreme Court’s previous decisions supports the Appellants’ arguments that the CFPB is unconstitutionally structured, the district court is AFFIRMED.”

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Ryan Grotz practices in Maurice Wutscher's Commercial Litigation, Consumer Credit Litigation, and Appellate groups. He has substantial experience in all phases of commercial litigation, including motion practice, written discovery, depositions, mediations, and bench and jury trials. Ryan received his Juris Doctor from the Chicago-Kent College of Law, where he was an associate editor on the Access to Justice Student Editorial Board. He was awarded his Bachelor of Business Administration degree from the University of Iowa. Ryan is licensed to practice law in Illinois and the U.S. District Court for the Northern District of Illinois. For more information, see

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