5th Circuit Holds CFPB Structure Constitutional despite Collins Precedent

On the same day the Supreme Court heard oral arguments in Seila Law v. CFPB, the Fifth Circuit announced a split decision finding the CFPB’s structure of a single agency head removable only for cause is constitutional.  This holding directly contrasts the Fifth Circuit’s 2019 opinion in Collins v. Mnuchin, which held that the FHFA’s nearly identical structure violated the constitution. 

In CFPB v. All American Check Cashing, the CFPB sued check-cashing and payday-lending companies and their owner for engaging in unfair and deceptive practices.  In response, the defendants argued the CFPB’s structure was unconstitutional because the CFPB is directed by a single agency head that is removable only for “inefficiency, neglect of duty, or malfeasance.”  The majority rejected this challenge, finding that the structure of the CFPB is not unconstitutional because “[n]either Congress nor any subordinate officer plays a role in the President’s exercise of his removal authority.”  Likewise, the majority recognized that despite the for cause removal provisions, there were no additional limits on executive authority, such as “layered removal clauses” found in prior cases.  Hence, the 2-1 majority declared the CFPB’s structure was constitutional.

To reach this result, the majority distinguished a prior en banc decision by the Fifth Circuit.  In Collins v. Mnuchin, the Fifth Circuit held that the FHFA’s single director structure was unconstitutional because the FHFA was “funded through annual assessments on the GSEs, is free of any formal executive control, and is led by a single director removable only for cause.”  In contrast, the majority explained that the existence of the Financial Stability Oversight Council (FSOC) distinguishes the CFPB from the FHFA.  The FSOC is able to veto a narrow class of rules made by the CFPB.  According to the majority, the FSOC’s veto process allows the executive to retain “an emergency brake” over the CFPB, while there is no similar “formal control” over the FHFA.

A noteworthy dissent relying heavily on Collins was filed in the case.  WBK also previously covered Collins here.