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PHH Corp. v. Consumer Financial Protection Bureau

United States Court of Appeals, District of Columbia Circuit

October 11, 2016

PHH Corporation, et al., Petitioners
v.
Consumer Financial Protection Bureau, Respondent

          Argued April 12, 2016

         On Petition for Review of an Order of the Consumer Financial Protection Bureau (CFPB File 2014-CFPB-0002)

          Theodore B. Olson argued the cause for petitioners. With him on the briefs were Helgi C. Walker, Mitchel H. Kider, David M. Souders, Thomas M. Hefferon, and William M. Jay.

          C. Boyden Gray, Adam J. White, Gregory Jacob, Sam Kazman, and Hans Bader were on the brief for amici curiae State National Bank of Big Spring, et al. in support of petitioners.

          Kirk D. Jensen and Alexandar S. Leonhardt were on the brief for amicus curiae Consumer Mortgage Coalition in support of petitioners.

          Joseph R. Palmore and Bryan J. Leitch were on the brief for amici curiae American Financial Services Association, et al. in support of petitioners.

          Andrew J. Pincus, Matthew A. Waring, Kathryn Comerford Todd, and Steven P. Lehotsky were on the brief for amicus curiae The Chamber of Commerce of the United States in support of petitioners.

          Jay N. Varon and Jennifer M. Keas were on the brief for amici curiae American Land Title Association, et al. in support of petitioners.

          Phillip L. Schulman and David T. Case were on the brief for amicus curiae National Association of Realtors in support of petitioners.

          Lawrence DeMille-Wagman, Senior Litigation Counsel, Consumer Financial Protection Bureau, argued the cause for respondent. With him on the brief were Meredith Fuchs, General Counsel, and John R. Coleman.

          Julie Nepveu was on the brief for amicus curiae AARP in support of respondent.

          Before: Henderson and Kavanaugh, Circuit Judges, and Randolph, Senior Circuit Judge.

          OPINION

          Kavanaugh, Circuit Judge

         Introduction and Summary

         This is a case about executive power and individual liberty. The U.S. Government's executive power to enforce federal law against private citizens - for example, to bring criminal prosecutions and civil enforcement actions - is essential to societal order and progress, but simultaneously a grave threat to individual liberty.

         The Framers understood that threat to individual liberty. When designing the executive power, the Framers first separated the executive power from the legislative and judicial powers. "The declared purpose of separating and dividing the powers of government, of course, was to 'diffus[e] power the better to secure liberty.'" Bowsher v. Synar, 478 U.S. 714, 721 (1986) (quoting Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring)). To ensure accountability for the exercise of executive power, and help safeguard liberty, the Framers then lodged full responsibility for the executive power in the President of the United States, who is elected by and accountable to the people. The text of Article II provides quite simply: "The executive Power shall be vested in a President of the United States of America." U.S. Const. art. II, § 1. And Article II assigns the President alone the authority and responsibility to "take Care that the Laws be faithfully executed." Id. § 3. As Justice Scalia explained: "The purpose of the separation and equilibration of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom." Morrison v. Olson, 487 U.S. 654, 727 (1988) (Scalia, J., dissenting).

         Of course, the President executes the laws with the assistance of subordinate executive officers who are appointed by the President, often with the advice and consent of the Senate. To carry out the executive power and be accountable for the exercise of that power, the President must be able to control subordinate officers in executive agencies. In its landmark decision in Myers v. United States, 272 U.S. 52 (1926), authored by Chief Justice and former President Taft, the Supreme Court therefore recognized the President's Article II authority to supervise, direct, and remove at will subordinate officers in the Executive Branch.

         In 1935, however, the Supreme Court carved out an exception to Myers and Article II by permitting Congress to create independent agencies that exercise executive power. See Humphrey's Executor v. United States, 295 U.S. 602 (1935). An agency is considered "independent" when the agency heads are removable by the President only for cause, not at will, and therefore are not supervised or directed by the President. Examples of independent agencies include well-known bodies such as the Federal Communications Commission, the Securities and Exchange Commission, the Federal Trade Commission, the National Labor Relations Board, and the Federal Energy Regulatory Commission. Those and other established independent agencies exercise executive power by bringing enforcement actions against private citizens and by issuing legally binding rules that implement statutes enacted by Congress.

         The independent agencies collectively constitute, in effect, a headless fourth branch of the U.S. Government. They exercise enormous power over the economic and social life of the United States. Because of their massive power and the absence of Presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.

         To help mitigate the risk to individual liberty, the independent agencies, although not checked by the President, have historically been headed by multiple commissioners, directors, or board members who act as checks on one another. Each independent agency has traditionally been established, in the Supreme Court's words, as a "body of experts appointed by law and informed by experience." Humphrey's Executor, 295 U.S. at 624 (internal quotation marks omitted). The multi-member structure reduces the risk of arbitrary decisionmaking and abuse of power, and thereby helps protect individual liberty.

         In other words, to help preserve individual liberty under Article II, the heads of executive agencies are accountable to and checked by the President, and the heads of independent agencies, although not accountable to or checked by the President, are at least accountable to and checked by their fellow commissioners or board members. No head of either an executive agency or an independent agency operates unilaterally without any check on his or her authority. Therefore, no independent agency exercising substantial executive authority has ever been headed by a single person.

         Until now.

         In the Dodd-Frank Act of 2010, Congress established a new independent agency, the Consumer Financial Protection Bureau. As proposed by then-Professor and now-Senator Elizabeth Warren, the CFPB was to be another traditional, multi-member independent agency. See Elizabeth Warren, Unsafe at Any Rate: If It's Good Enough for Microwaves, It's Good Enough for Mortgages. Why We Need a Financial Product Safety Commission, Democracy, Summer 2007, at 8, 16-18. The initial Executive Branch proposal in 2009 likewise envisioned a traditional, multi-member independent agency. See Department of the Treasury, Financial Regulatory Reform: A New Foundation: Rebuilding Financial Supervision and Regulation 58 (2009). The House-passed bill sponsored by Congressman Barney Frank and championed by Speaker Nancy Pelosi also contemplated a traditional, multi-member independent agency. See H.R. 4173, 111th Cong. § 4103 (as passed by House, Dec. 11, 2009).

         But Congress ultimately departed from the Warren and Administration proposals, and from the House bill. Congress established the CFPB as an independent agency headed not by a multi-member commission but rather by a single Director.

         Because the CFPB is an independent agency headed by a single Director and not by a multi-member commission, the Director of the CFPB possesses more unilateral authority - that is, authority to take action on one's own, subject to no check - than any single commissioner or board member in any other independent agency in the U.S. Government. Indeed, as we will explain, the Director enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.

         At the same time, the Director of the CFPB possesses enormous power over American business, American consumers, and the overall U.S. economy. The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law. (To be sure, judicial review serves as a constraint on illegal actions, but not on discretionary decisions within legal boundaries; therefore, subsequent judicial review of individual agency decisions has never been regarded as sufficient to excuse a structural separation of powers violation.)

         That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case.

         The petitioner here, PHH, is a mortgage lender and was the subject of a CFPB enforcement action that resulted in a $109 million order against it. In seeking to vacate the order, PHH argues that the CFPB's status as an independent agency headed by a single Director violates Article II of the Constitution.

         The question before us is whether we may extend the Supreme Court's Humphrey's Executor precedent to cover this novel, single-Director agency structure for an independent agency. To analyze that issue, we follow the history-focused approach long applied by the Supreme Court in separation of powers cases where, as here, the constitutional text alone does not resolve the matter.

         Two recent Supreme Court decisions exemplify that historical analysis. In its 2010 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board, the Supreme Court held that the new Accounting Oversight Board at issue in that case - with two levels rather than one level of for-cause protection insulating the independent agency heads from the President - exceeded the bounds on traditional independent agencies and thus violated Article II. 561 U.S. 477, 514 (2010). In so ruling, the Court emphasized, among other things, the novelty of the Board's structure: "Perhaps the most telling indication of the severe constitutional problem with the PCAOB is the lack of historical precedent for this entity." Id. at 505 (internal quotation marks omitted). In its 2014 decision in NLRB v. Noel Canning, the Supreme Court held that recess appointments in Senate recesses of fewer than 10 days were presumptively unconstitutional under Article II. 134 S.Ct. 2550, 2567, slip op. at 21 (2014). Why 10 days? The Court explained: "Long settled and established practice is a consideration of great weight in a proper interpretation of constitutional provisions regulating the relationship between Congress and the President." Id. at 2559, slip op. at 7 (internal quotation marks and alteration omitted). And the historical practice of Presidents and Senates had established a de facto 10-day line so that recess appointments in recesses of fewer than 10 days were impermissible. See id. at 2567, slip op. at 20-21.

         As those two cases illustrate, history and tradition are critical factors in separation of powers cases where the constitutional text does not otherwise resolve the matter. As Justice Breyer wrote for the Court in Noel Canning, that bedrock principle - namely, that the "longstanding practice of the government can inform our determination of what the law is" - is "neither new nor controversial." Id. at 2560, slip op. at 7 (internal quotation marks and citation omitted) (quoting McCulloch v. Maryland, 17 U.S. 316, 401 (1819) and Marbury v. Madison, 5 U.S. 137, 177 (1803)).

         In this case, the single-Director structure of the CFPB represents a gross departure from settled historical practice. Never before has an independent agency exercising substantial executive authority been headed by just one person.

         The CFPB's concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decisionmaking and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency. The overarching constitutional concern with independent agencies is that the agencies are unchecked by the President, the official who is accountable to the people and who is responsible under Article II for the exercise of executive power. Recognizing the broad and unaccountable power wielded by independent agencies, Congresses and Presidents of both political parties have therefore long endeavored to keep independent agencies in check through other statutory means. In particular, to check independent agencies, Congress has traditionally required multi-member bodies at the helm of every independent agency. In lieu of Presidential control, the multi-member structure of independent agencies acts as a critical substitute check on the excesses of any individual independent agency head - a check that helps to prevent arbitrary decisionmaking and thereby to protect individual liberty.

         This new agency, the CFPB, lacks that critical check and structural constitutional protection, yet wields vast power over the U.S. economy. So "this wolf comes as a wolf." Morrison v. Olson, 487 U.S. at 699 (Scalia, J., dissenting).

         In light of the consistent historical practice under which independent agencies have been headed by multiple commissioners or board members, and in light of the threat to individual liberty posed by a single-Director independent agency, we conclude that Humphrey's Executor cannot be stretched to cover this novel agency structure. We therefore hold that the CFPB is unconstitutionally structured.

         What is the remedy for that constitutional flaw? PHH contends that the constitutional flaw means that we must shut down the entire CFPB (if not invalidate the entire Dodd-Frank Act) until Congress, if it chooses, passes new legislation fixing the constitutional flaw. But Supreme Court precedent dictates a narrower remedy. To remedy the constitutional flaw, we follow the Supreme Court's precedents, including Free Enterprise Fund, and simply sever the statute's unconstitutional for-cause provision from the remainder of the statute. Here, that targeted remedy will not affect the ongoing operations of the CFPB. With the for-cause provision severed, the President now will have the power to remove the Director at will, and to supervise and direct the Director. The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury. Those executive agencies have traditionally been headed by a single person precisely because the agency head operates within the Executive Branch chain of command under the supervision and direction of the President. The President is a check on and accountable for the actions of those executive agencies, and the President now will be a check on and accountable for the actions of the CFPB as well.

         Because the CFPB as remedied will continue operating, we must also address the statutory issues raised by PHH in its challenge to the $109 million order against it.[1] PHH raises three main statutory arguments.

         First, PHH argues that the CFPB incorrectly interpreted Section 8 of the Real Estate Settlement Procedures Act to bar so-called captive reinsurance arrangements involving mortgage lenders such as PHH and their affiliated reinsurers. In a captive reinsurance arrangement, a mortgage lender (such as PHH) refers borrowers to a mortgage insurer. In return, the mortgage insurer buys reinsurance from a mortgage reinsurer affiliated with (or owned by) the referring mortgage lender. We agree with PHH that Section 8 of the Act allows captive reinsurance arrangements so long as the amount paid by the mortgage insurer for the reinsurance does not exceed the reasonable market value of the reinsurance.

         Second, PHH claims that, in any event, the CFPB departed from the consistent prior interpretations issued by the Department of Housing and Urban Development, and that the CFPB then retroactively applied its new interpretation of the Act against PHH, thereby violating PHH's due process rights. We again agree with PHH: The CFPB's order violated bedrock principles of due process.

         Third, in light of our ruling on the constitutional and statutory issues, the CFPB on remand still will have an opportunity to demonstrate that the relevant mortgage insurers in fact paid more than reasonable market value to the PHH-affiliated reinsurer for reinsurance, thereby making disguised payments for referrals in contravention of Section 8. PHH claims, however, that much of the alleged misconduct occurred outside of the three-year statute of limitations and therefore may not be the subject of a CFPB enforcement action. The CFPB responds that, under Dodd-Frank, there is no statute of limitations for any CFPB administrative actions to enforce any consumer protection law. In the alternative, the CFPB contends that there is no statute of limitations for administrative actions to enforce Section 8 of the Real Estate Settlement Procedures Act. We disagree with the CFPB on both points. First of all, the Dodd-Frank Act incorporates the statutes of limitations in the underlying statutes enforced by the CFPB in administrative proceedings. And under the Real Estate Settlement Procedures Act, a three-year statute of limitations applies to all CFPB enforcement actions to enforce Section 8, whether brought in court or administratively.

         In sum, we grant PHH's petition for review, vacate the CFPB's order against PHH, and remand for further proceedings consistent with this opinion. On remand, the CFPB may determine among other things whether, within the applicable three-year statute of limitations, the relevant mortgage insurers paid more than reasonable market value to the PHH-affiliated reinsurer.

         In so ruling, we underscore the important but limited real-world implications of our decision. As before, the CFPB will continue to operate and perform its many critical responsibilities, albeit under the ultimate supervision and direction of the President. Section 8 will continue to mean what it has traditionally meant: that captive reinsurance agreements are permissible so long as the mortgage insurer pays no more than reasonable market value for the reinsurance. And the three-year statute of limitations that has traditionally applied to agency actions to enforce Section 8 will continue to apply.

         With apologies for the length of this opinion, we now turn to our detailed explanation and analysis of these important issues.

         I

         PHH is a large home mortgage lender. When PHH and other lenders provide mortgage loans to homebuyers, they require certain homebuyers to obtain mortgage insurance. Mortgage insurance protects lenders by covering part of the lenders' losses if homebuyers default on their mortgages. Homebuyers pay monthly premiums to the mortgage insurer for the insurance.

         In turn, mortgage insurers may obtain mortgage reinsurance. In the same way that mortgage insurance protects lenders, mortgage reinsurance protects mortgage insurers. Reinsurers assume some of the risk of insuring the mortgage. In exchange, mortgage insurers pay a fee (usually a portion of the homebuyers' monthly insurance premiums) to the reinsurers.

         In 1994, PHH established a wholly owned subsidiary known as Atrium Insurance Corporation. Atrium provided reinsurance to the mortgage insurers that insured mortgages generated by PHH. In return, PHH often referred borrowers to mortgage insurers that used Atrium's reinsurance services. That is known as a "captive reinsurance" arrangement, which was not uncommon in the industry at the time. According to PHH, the mortgage insurers did not pay more than reasonable market value to Atrium for the reinsurance.

         Originally passed by Congress and signed by President Ford in 1974, the Real Estate Settlement Procedures Act is a broad statute governing real estate transactions. One of its stated purposes was "the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services." 12 U.S.C. § 2601(b)(2).

         To achieve that objective, Section 8(a) of the Act, which is titled "Prohibition against kickbacks and unearned fees, " provides: "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." Id. § 2607(a). In plain English, Section 8(a) prohibits, as relevant here, paying for a referral - for example, a mortgage insurer's paying a lender for the lender's referral of homebuying customers to that mortgage insurer.

         Standing alone, Section 8(a) perhaps might have been construed by government enforcement agencies to cast doubt on a mortgage lender's referrals of customers to mortgage insurers who in turn purchased reinsurance from a reinsurer affiliated with the lender. But another provision of the Real Estate Settlement Procedures Act, Section 8(c), carved out a series of expansive exceptions, qualifications, and safe harbors related to Section 8(a). Of relevance here, Section 8(c) provides: "Nothing in this section shall be construed as prohibiting . . . (2) the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed . . . ." Id. § 2607(c).

         Before the creation of the CFPB in 2010, the Department of Housing and Urban Development, known as HUD, interpreted Section 8(c) to establish a safe harbor allowing bona fide transactions between a lender and a mortgage insurer (or between a mortgage insurer and a lender-affiliated reinsurer), so long as the mortgage insurer did not pay the lender for a referral. HUD therefore interpreted Section 8(c) to allow captive reinsurance arrangements so long as the mortgage insurer paid no more than reasonable market value for the reinsurance. If the mortgage insurer paid more than reasonable market value for the reinsurance, then a presumption would arise that the excess payment was indeed a disguised payment for the referral, which is impermissible under Section 8(a). HUD repeatedly reaffirmed that interpretation, and the mortgage lending industry relied on it.

         When Congress created the CFPB in 2010, Congress provided that the CFPB would take over enforcement of Section 8 from HUD. By regulation, the CFPB carried forward HUD's rules, policy statements, and guidance, subject of course to any future change by the CFPB.

         Therefore, under Section 8(c), as authoritatively interpreted by the Federal Government, PHH as a mortgage lender could refer customers to mortgage insurers who obtained reinsurance from Atrium - so long as the mortgage insurers paid Atrium no more than reasonable market value for the reinsurance.

         Or so PHH thought. In 2014, notwithstanding Section 8(c) and HUD's longstanding interpretation, the CFPB initiated an administrative enforcement action against PHH. The CFPB alleged that PHH's captive reinsurance arrangement with the mortgage insurers violated Section 8.

         Under the CFPB's newly minted interpretation, Section 8 prohibits most referrals made by lenders to mortgage insurers in exchange for the insurer's purchasing reinsurance from a lender-affiliated reinsurer. The CFPB said that Section 8 bars such a captive reinsurance arrangement even when the mortgage insurer pays no more than reasonable market value to the reinsurer for the reinsurance.

         In its order in this case, the CFPB thus discarded HUD's longstanding interpretation of Section 8 and, for the first time, pronounced its new interpretation. And then the CFPB applied its new interpretation of Section 8 retroactively against PHH, notwithstanding PHH's reliance on HUD's prior interpretation. The CFPB sanctioned PHH for previous actions that PHH had taken in reliance on HUD's prior interpretation, even though PHH's conduct had occurred before the CFPB's new interpretation of Section 8. The CFPB ordered PHH to pay $109 million in disgorgement and enjoined PHH from entering into future captive reinsurance arrangements.

         PHH petitioned this Court for review. A motions panel of this Court (Judges Henderson, Millett, and Wilkins) previously granted PHH's motion for a stay of the CFPB's order pending resolution of the merits in this case.

         II

         In challenging the enforcement action against it, PHH raises a fundamental constitutional objection to the entire proceeding. According to PHH, the CFPB's structure violates Article II of the Constitution because the CFPB operates as an independent agency headed by a single Director. PHH argues that, to comply with Article II, either (i) the agency's Director must be removable at will by the President, meaning that the CFPB would operate as a traditional executive agency; or (ii) if structured as an independent agency, the agency must be structured as a multi-member commission. We agree.

         A

         We begin by describing the background of independent agencies in general and the CFPB in particular.

         As the Supreme Court has explained, our Constitution "was adopted to enable the people to govern themselves, through their elected leaders, " and the Constitution "requires that a President chosen by the entire Nation oversee the execution of the laws." Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477, 499 (2010). Under the text of Article II, the President alone is responsible for exercising the executive power. The first 15 words of Article II of the Constitution provide: "The executive Power shall be vested in a President of the United States of America." U.S. Const. art. II, § 1. And Article II assigns the President alone the authority and responsibility to "take Care that the Laws be faithfully executed." Id. § 3. Article II makes "emphatically clear from start to finish" that "the president would be personally responsible for his branch." Akhil Reed Amar, America's Constitution: A Biography 197 (2005); see also Neomi Rao, Removal: Necessary and Sufficient for Presidential Control, 65 Ala.L.Rev. 1205, 1215 (2014) ("The text and structure of Article II provide the President with the power to control subordinates within the executive branch.").

         To exercise the executive power, the President must have the assistance of subordinates. See Free Enterprise Fund, 561 U.S. at 483. The Framers therefore provided for the appointment of executive officers and the creation of executive departments to assist the President "in discharging the duties of his trust." Id. (internal quotation marks omitted); see U.S. Const. art. II, § 2.

         In order to maintain control over the exercise of executive power and take care that the laws are faithfully executed, the President must be able to supervise and direct those subordinate executive officers. See Free Enterprise Fund, 561 U.S. at 498-502. As James Madison stated during the First Congress, "if any power whatsoever is in its nature Executive, it is the power of appointing, overseeing, and controlling those who execute the laws." 1 Annals of Congress 463 (Madison) (1789) (Joseph Gales ed., 1834).

         To supervise and direct executive officers, the President must be able to remove those officers at will. See generally Myers v. United States, 272 U.S. 52 (1926). Otherwise, a subordinate could ignore the President's supervision and direction without fear, and the President could do nothing about it. See Bowsher v. Synar, 478 U.S. 714, 726 (1986) ("Once an officer is appointed, it is only the authority that can remove him, and not the authority that appointed him, that he must fear and, in the performance of his functions, obey.") (internal quotation marks omitted). The Article II chain of command depends on the President's removal power. As James Madison explained: "If the President should possess alone the power of removal from office, those who are employed in the execution of the law will be in their proper situation, and the chain of dependence be preserved; the lowest officers, the middle grade, and the highest, will depend, as they ought, on the President, and the President on the community." 1 Annals of Congress 499 (Madison). The Supreme Court recently summarized the Article II chain of command this way: "The Constitution that makes the President accountable to the people for executing the laws also gives him the power to do so. That power includes, as a general matter, the authority to remove those who assist him in carrying out his duties. Without such power, the President could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else." Free Enterprise Fund, 561 U.S. at 513-14.

         In the late 1800s and the early 1900s, as part of the Progressive Movement and an emerging belief in expert, apolitical, and scientific answers to certain public policy questions, Congress began creating new expert agencies that were independent of the President but that exercised executive power. The heads of those independent agencies were removable by the President only for cause, not at will, and were neither supervised nor directed by the President. Some early examples included the Interstate Commerce Commission (1887) and the Federal Trade Commission (1914). Importantly, the independent agencies were all multi-member bodies: They were designed as non-partisan expert bodies that would neutrally and impartially issue rules, bring law enforcement actions, and resolve disputes in their respective jurisdictions.

         In a 1926 decision written by Chief Justice and former President Taft, the Supreme Court ruled that, under Article II, the President must be able to supervise, direct, and remove at will certain executive officers. The Court stated: "[W]hen the grant of the executive power is enforced by the express mandate to take care that the laws be faithfully executed, it emphasizes the necessity for including within the executive power as conferred the exclusive power of removal." Myers, 272 U.S. at 122.

         A few years later, based on his reading of Article II and the Court's 1926 decision in Myers, President Franklin Roosevelt vigorously contested the idea that Congress could create independent agencies and thereby prevent the President from controlling the executive power vested in those independent agencies. President Roosevelt did not object to the existence of the agencies; rather, he objected to the President's lack of control over these agencies, which after all were exercising important executive power.

         The issue came to a head in President Roosevelt's dispute with William E. Humphrey, a commissioner of the Federal Trade Commission. Commissioner Humphrey was a Republican holdover from the Hoover Administration who, in President Roosevelt's view, was too sympathetic to big business and hostile to the Roosevelt Administration's regulatory agenda. Asserting his authority under Article II, President Roosevelt fired Commissioner Humphrey. Humphrey contested his removal, arguing that he was protected against firing by the statute's for-cause removal provision, and further arguing that Congress possessed authority to create such independent agencies without violating Article II. The case reached the Supreme Court in 1935.

         At its core, the case raised the question whether Article II permitted Congress to create independent agencies whose heads were not removable at will and would operate free of the President's supervision and direction. Representing President Roosevelt, the Solicitor General argued that the case was straightforward and controlled by the text and history of Article II and the Court's 1926 decision in Myers. But notwithstanding Article II and the decision in Myers, the Supreme Court upheld the constitutionality of independent agencies - a decision that so incensed President Roosevelt that it helped trigger his ill-fated court reorganization plan in 1937. See Humphrey's Executor v. United States, 295 U.S. 602, 624, 631-32 (1935). In allowing independent agencies, the Humphrey's Executor Court found it significant that the Federal Trade Commission was intended "to be non-partisan, " to "act with entire impartiality, " and "to exercise the trained judgment of a body of experts appointed by law and informed by experience." Id. at 624 (internal quotation marks omitted). Those characteristics, among others, led the Court to conclude that Congress could create an independent agency "wholly disconnected from the executive department." Id. at 630. According to the Court, Congress could therefore limit the President's power to remove the commissioners of the Federal Trade Commission and, by extension, Congress could limit the President's power to remove the commissioners and board directors of similar independent agencies. Id. at 628-30.[2]

         In the wake of the 1935 Humphrey's Executor decision, independent agencies have continued to play an enormous role in the U.S. Government. The independent agencies possess massive authority over vast swaths of American economic and social life.

         Importantly, however, the independent agencies have traditionally operated - and continue to operate - as multi-member "bod[ies] of experts appointed by law and informed by experience." Id. at 624 (internal quotation marks omitted).[3]

         The independent agency at issue here, the CFPB, arose out of an idea originally proposed by then-Professor and now-Senator Elizabeth Warren. In 2007, concerned about balkanized and inconsistent federal law enforcement of consumer protection statutes, Professor Warren advocated that Congress create a new independent agency, which she called a Financial Product Safety Commission. This new agency would centralize and unify federal law enforcement to protect consumers. See Elizabeth Warren, Unsafe at Any Rate: If It's Good Enough for Microwaves, It's Good Enough for Mortgages. Why We Need a Financial Product Safety Commission, Democracy, Summer 2007, at 8, 16-18.

         The agency proposed by Professor Warren was to operate as a traditional multi-member independent agency. The subsequent Executive Branch proposal for such a new agency likewise contemplated a multi-member structure. See Department of the Treasury, Financial Regulatory Reform: A New Foundation: Rebuilding Financial Supervision and Regulation 58 (2009). The originally passed House bill sponsored by Congressman Barney Frank and supported by Speaker Nancy Pelosi also would have created a traditional multi-member independent agency. See H.R. 4173, 111th Cong. § 4103 (as passed by House, Dec. 11, 2009).

         But Congress ultimately strayed from the Warren and Executive Branch proposals, and from the House bill, as well as from historical practice, by creating an independent agency with only a single Director. See Dodd-Frank Wall Street Reform and Consumer Protection Act, § 1011, 12 U.S.C. § 5491. Congress made the Director of the CFPB removable only for cause - that is, for "inefficiency, neglect of duty, or malfeasance in office" - during the Director's fixed five-year term. See 12 U.S.C. § 5491(c)(3); Humphrey's Executor, 295 U.S. at 620. Under the statute, the President therefore may not supervise, direct, or remove at will the Director. As a result, this statute means that a Director appointed by a President may continue to serve in office even if the President later wants to remove the Director based on policy disagreement, for example. This statute also means that a Director may even continue to serve under a new President (at least until the Director's statutory five-year tenure has elapsed), even though the new President might strongly disagree with the Director about policy issues or the overall direction of the agency.

         At the same time, Congress granted the CFPB broad authority to enforce U.S. consumer protection laws. Under the Dodd-Frank Act, the CFPB possesses the power to "prescribe rules or issue orders or guidelines pursuant to" 19 distinct consumer protection laws. 12 U.S.C. § 5581(a)(1)(A); see also id. § 5481(14). That power was previously exercised by seven different government agencies. See id. § 5581(b) (transferring to the CFPB "[a]ll consumer financial protection functions" previously exercised by the Board of Governors of the Federal Reserve, the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and select functions of the Department of Housing and Urban Development and the Federal Trade Commission). The CFPB may pursue actions to enforce the consumer protection laws in federal court, as well as in administrative actions before administrative law judges, and may issue subpoenas requesting documents or testimony in connection with those enforcement actions. See id. §§ 5562-5564. The CFPB has the power to impose a wide range of legal and equitable relief, including restitution, disgorgement, money damages, injunctions, and civil monetary penalties. Id. § 5565(a)(2). And all of this massive power is lodged in one person - the Director - who is not supervised, directed, or checked by the President or by other directors.

         Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB's broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency. By "unilateral power, " we mean power that is not checked by the President or by other colleagues. 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. What about the Speaker of the House, you might ask? The Speaker can pass legislation only if 218 Members agree. The Senate Majority Leader? The Leader needs 60 Senators to invoke cloture, and needs a majority of Senators (usually 51 Senators or 50 plus the Vice President) to approve a law or nomination. The Chief Justice? The Chief Justice must obtain four other Justices' votes for his or her position to prevail. The Chair of the Federal Reserve? The Chair needs the approval of a majority of the Federal Reserve Board. The Secretary of Defense? The Secretary is supervised and directed by the President. On any decision, the Secretary must do as the President says. So too with the Secretary of State, and the Secretary of the Treasury, and the Attorney General.

         To be sure, the Dodd-Frank Act requires the Director to establish and consult with a "Consumer Advisory Board." See id. § 5494. But the advisory board is just that: advisory. Nothing requires the Director to heed the Board's advice. Without the formal authority to prevent unilateral action by the Director, the Advisory Board does not come close to equating to the check provided by the multi-member structure of traditional independent commissions.

         The Act also, in theory, allows a supermajority of the Financial Stability Oversight Council to veto certain regulations of the Director. See id. § 5513. But by statute, the veto power may be used only to prevent regulations (not to prevent enforcement actions or adjudications); only when two-thirds of the Council members agree; and only when a regulation puts "the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk, " a standard unlikely to be met in practice in most cases. Id. § 5513(c)(3)(B)(ii); see S. Rep. No. 111-176, at 166 ("The Committee notes that there was no evidence provided during its hearings that consumer protection regulation would put safety and soundness at risk."); see also Todd Zywicki, The Consumer Financial Protection Bureau: Savior or Menace?, 81 Geo. Wash.L.Rev. 856, 875 (2013) ("[S]ubstantive checks on the CFPB can be triggered . . . only under the extreme circumstance of a severe threat to the safety and soundness of the American financial system. It is likely that this extreme test will rarely be satisfied in practice."); Recent Legislation, Dodd-Frank Act Creates the Consumer Financial Protection Bureau, 124 Harv. L. Rev. 2123, 2129 (2011) ("[T]he high standard for vetoing regulations . . . will be difficult to establish."). The veto power could not have been used in this case to override the Director's determination regarding Section 8, for example. As with the consultation requirement, the Act's limited veto provision falls far short of making the CFPB the equivalent of a multi-member independent agency.

         Finally, the Act technically makes the CFPB part of the Federal Reserve for certain administrative purposes. See, e.g., 12 U.S.C. § 5491(a); see also id. § 5493. But that is irrelevant to the present analysis because the Federal Reserve may not supervise, direct, or remove the Director.

         In short, when measured in terms of unilateral power, the Director of the CFPB is the single most powerful official in the entire U.S. Government, other than the President. Indeed, within his jurisdiction, the Director of the CFPB can be considered even more powerful than the President. It is the Director's view of consumer protection law that prevails over all others. In essence, the Director is the President of Consumer Finance. The concentration of massive, unchecked power in a single Director marks a departure from settled historical practice and makes the CFPB unique among traditional independent agencies, as we will now explain.

         B

         As a single-Director independent agency exercising substantial executive authority, the CFPB is the first of its kind and a historical anomaly. Until this point in U.S. history, independent agencies exercising substantial executive authority have all been multi-member commissions or boards. A sample list includes:

• Interstate Commerce Commission (1887)
• Federal Reserve Board (1913)
• Federal Trade Commission (1914)
• U.S. International Trade Commission (1916)
• Federal Deposit Insurance Corporation (1933)
• Federal Communications Commission (1934)
• National Mediation Board (1934)
• Securities and Exchange Commission (1934)
• National Labor Relations Board (1935)
• Federal Maritime Commission (1961)
• National Transportation Safety ...

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