Last week, four separate entities filed amicus briefs in the State National Bank of Big Spring v. Mnuchin, Case No. 18-5062, case before the U.S. Supreme Court this term. As previously reported by insideARM, this case questions the constitutionality of the Bureau of Consumer Financial Protection’s (BCFP or Bureau) structure due to the “for-cause” removal requirement of the Bureau’s director, the Bureau’s exemption from Congress’s power of the purse, and lack of internal checks and balances due to the Bureau’s single director structure.

All four petitions are filed in support of State National Bank of Big Spring, arguing that the Court should find the Bureau’s structure unconstitutional.

Buckeye Institute Brief

The Ohio-based think tank makes two main arguments. First, that the Bureau is almost completely insulated from oversight by the Executive and Legislative branches of government due to the “for-cause ” requirement for removing the director. Due to the 5 year term of the director, the brief points out that “a President could serve a full term without ever having any say in who runs this powerful agency.” The brief also calls out the Bureau's bypass Congress's power of the purse because it does not rely on the Legislative branch for funding.

One interesting argument in this brief is that it advocates for a state, rather than a national, solution. The Buckeye Institute states that the nation is large, diverse, and polarized and asks “[w]hy, then, do we try to resolve so many issues on a national level?”

Southeast Legal Foundation, National Federation of Independent Business Small Business Legal Center, and Cato Institute Brief

This brief argues that “Congress violated the separation of powers principle when it created the [BCFP] and gave the [BCFP]’s Director unilateral and unchecked power to legislate, execute, and adjudicate nineteen federal consumer protection statutes.” This brief points to an issue that the D.C. Circuit Court of Appeals summarily denied in its en banc rehearing of PHH v. Consumer Financial Protection Bureau: considerations of individual liberties. The brief argues that the separation of powers protects individual liberties and that the current structure of the Bureau does the opposite.

Landmark Legal Foundation Brief

This brief likewise finds that Congress violated the separation of powers with the creation of the BCFP. It discusses how executive power in the Bureau is not diffused with a multi-member commission. Instead, it rests solely in the hands of a single director who can be removed only for cause by the President. This brief, similar to the Southeast Legal Foundation's brief, speaks to the Bureau's exemption from Congress's power of the purse by being allowed to set its own budget and draw funds directly from the Federal Reserve.

Pacific Legal Foundation Brief

What sets this brief apart from the others is that it references how the Bureau steps on the toes of the Judicial branch. This brief discusses all of the different hurdles a company must clear within the BCFP before it has a chance at judicial review of the matter. Even when a company finally gets its case before a court, the decision can only be reviewed under the “abuse of discretion” standard and the BCFP’s findings of fact are “all but unreviewable.”

This brief also calls out the Bureau’s ability to create regulations by enforcement. By using enforcement actions to establish new policies, the Bureau could “challenge conduct that was, prior to the enforcement action, perfectly legal.”

insideARM Perspective

While all four of these briefs show support a finding that the Bureau’s structure is unconstitutional, we will likely see briefs supporting the other side of the argument in the weeks to come. With Justice Kavanaugh now officially on the bench, who authored the dissenting opinion in the en banc review of PHH v. CFPB, we already know how at least one vote will go.

As it relates to the comments made in the Pacific Legal Foundation's brief, Acting Director Mick Mulvaney stated that his hope was to provide clear regulatory rules and reduce regulation by enforcement. However, what the current director (or acting director) does is not indicative of what a future director could do. Bringing this issue to the Supreme Court's attention is important as the court can clarify whether this type of action by the Bureau is constitutional.

The due date for the Bureau's response in the Supreme Court case was moved from October 10, 2018 to November 9, 2018.

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Tags: CFPB