9th Circuit Rules CFPB’s Structure is Constitutional

On May 6, 2019, the U.S. Court of Appeals for the 9th Circuit held that the CFPB’s single-director structure is constitutional, and affirmed the district court’s order granting the CFPB’s petition to enforce a law firm’s compliance with the CFPB’s civil investigative demand (CID). 

The CFPB previously determined that none of the objections raised by the law firm warranted setting aside or modifying the CID, which sought to determine whether the law firm violated the Telemarketing Sales Rule (TSR) when providing debt-relief services.  The law firm argued that the CFPB’s single-director structure was unconstitutional and therefore the CID was unlawful.  It argued further that the CFPB lacked statutory authority to issue the CID.  In rejecting the constitutional challenge, the Ninth Circuit relied on U.S. Supreme Court precedent, which in the Ninth Circuit’s view, “indicate that the for-cause removal restriction protecting the CFPB’s Director does not ‘impede the President’s ability to perform his constitutional duty’ to ensure that the laws are faithfully executed.”  Further, the panel also relied on the D.C. Circuit’s en banc PHH decision, which held that the CFPB’s structure is constitutional, stating that “if an agency’s leadership is protected by a for-cause removal restriction, the President can arguably exert more effective control over the agency if it is headed by a single individual rather than a multi-member body.”

The panel held that the CID did not violate the CFPA’s practice-of-law-exclusion because the TSR “does not exempt attorneys from its coverage even when they are engaged in providing legal services.”  In addition, the panel rejected the law firm’s argument that the CID was vague or overly broad, and stated that the CID “suffices to put [the law firm] on notice of the nature of the conduct the CFPB is investigating, and it is not so general as to raise vagueness or overbreadth concerns.”