The CFPB Survives

In a blockbuster ruling, the D.C. Circuit reminds the Trump administration that real liberty isn’t limited to corporations.

Judge Nina Pillard.
Photo illustration by Slate. Photo by Jim Watson/AFP/Getty Images.

In a rebuke to the Trump administration’s deregulatory ambitions, a federal appeals court ruled Wednesday that the structure of the Consumer Financial Protection Bureau complies with the Constitution. Many Republicans and attorneys in the financial industry had claimed a key provision of the CFPB—which provides for an independent director with a five-year term in office, subject to removal by the president only for “inefficiency, neglect of duty, or malfeasance in office”—unconstitutionally strips the president of his constitutional powers as set forth in Article II. In a 7–3 decision, the U.S. Court of Appeals for the District of Columbia Circuit disagreed.

Wednesday’s decision marks a forceful rebuke to the Trump administration’s alarmingly broad theory of executive power. Since taking office, Donald Trump has acted as though every employee of the federal government must carry out his agenda or risk termination. His judicial appointees have translated this vision into legal principles that bolster the president’s authority to do whatever he wants. The D.C. Circuit flatly rebuffed this view, shielding a vital agency from the president’s partisan whims. In doing so, it rejected an artificial conception of constitutional liberty in favor of a pragmatic and fundamentally democratic jurisprudence.

The CFPB, which Congress created as part of the Dodd-Frank Act to regulate Wall Street following the 2008 financial crash, has returned about $11.8 billion to roughly 29 million consumers since 2011. But this winter, Trump installed his Office of Management and Budget director, Mick Mulvaney—an avowed enemy of the bureau—as its acting director. Mulvaney recently requested zero dollars in funding for the agency, fueling fears he will defang it altogether. (Leandra English, who serves as deputy director, continues to argue in court that she should head the CFPB.)


The constitutional challenge to the CFPB centers on the president’s authority to manage executive branch officials. The Trump administration claimed that, because the CFPB is part of the executive branch, the president must be able to fire its director at will. PHH, a mortgage company the CFPB had fined $109 million in 2015 for allegedly running an illegal insurance kickback scheme, went further, arguing in court that the agency should be dissolved altogether. In October 2016, a three-judge panel of the D.C. Circuit ruled in favor of PHH, arguing that the agency’s structure was unconstitutional. The full D.C. Circuit then vacated the panel’s decision and reheard the case and has now affirmed the agency’s constitutionality.

Judge Nina Pillard’s opinion for the court explains how the panel—and the Trump administration, and PHH—went wrong. The Constitution, Pillard wrote, permits Congress to establish “independent” agencies that are “one step removed from political winds and presidential will.” Indeed, in 1935, the Supreme Court ruled that the president lacks “illimitable power of removal” over these agencies, and Congress can insulate their commissioners from termination without good cause.

That decision, Pillard held, controls here. The main distinction between the CFPB and most other independent agencies is that the CFPB has a single director, instead of a group of commissioners. But Pillard found that this feature does not weigh against the agency’s constitutionality. She pointed out that the Supreme Court has instead drawn a line between officials who exercise “core executive functions” (whom the president may fire at will) and those assigned a “degree of independence” by Congress (who may be protected from presidential caprice). The CFPB director, Pillard concluded, clearly falls in the latter category, and may therefore be shielded from arbitrary or purely political removal.


Judge Karen LeCraft Henderson dissented, arguing that the entire agency violates the Constitution and “should be invalidated top to bottom.” (Henderson has veered sharply to the right in the Trump era; she recently argued that undocumented immigrants are not even “persons” under the Constitution.) Judge Brett Kavanaugh also dissented, joined by Judge A. Raymond Randolph; he would have ruled that the president must be able to fire the CFPB director at will.

Kavanaugh’s dissent carefully lays out the conservative case against the CFPB’s independence. “This is a case about executive power and individual liberty,” he begins gravely:

To prevent tyranny and protect individual liberty, the Framers of the Constitution separated the legislative, executive, and judicial powers of the new national government. To further safeguard liberty, the Framers insisted upon accountability for the exercise of executive power.

That’s true, of course, but how does it affect any “liberty” interest in this case? Kavanaugh asserts that the CFPB’s single commissioner setup “threatens individual liberty more than the traditional multi-member structure does.” When multiple commissioners oversee an agency, they can check each other’s excesses. But the absence of this “traditional safeguard,” Kavanaugh insists, threatens “the individual liberty protected by the Constitution’s separation of powers.”

Kavanaugh is essentially spitballing here, improvising a novel standard on the basis of his own judicial philosophy rather than the text of the Constitution. His theory harks back to the Lochner era, when freewheeling federal courts struck down economic protections for workers as an infringement on some hazy notion of “liberty.”

Pillard eloquently dismisses this “unmoored liberty analysis” as a one-way ratchet designed to protect powerful corporations from regulations:

It remains unexplained why we would assess [the law] with reference to the liberty of financial services providers, and not more broadly to the liberty of the individuals and families who are their customers. Congress determined that, without the Dodd-Frank Act and the CFPB, the activities the CFPB is now empowered to regulate contributed to the 2008 economic crisis and Americans’ devastating losses of property and livelihood. Congress understood that markets’ contribution to human liberty derives from freedom of contract, and that such freedom depends on market participants’ access to accurate information, and on clear and reliably enforced rules against fraud and coercion. Congress designed the CFPB with those realities in mind.

At a moment when Trump and congressional Republicans argue that the FBI and the federal courts work exclusively for the president, the dispute between Kavanaugh and Pillard about constitutional abstractions like “liberty” and “independence” becomes salient in ways that transcend a case that can seem hypertechnical. Now, perhaps more than ever, Trump’s cynical efforts to dismantle agencies that Congress established to protect the most vulnerable should be seen for precisely what they are. “Liberty” has nothing to do with it.

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