The Supreme Court has agreed to hear a case that could have implications regarding the constitutionality of the Consumer Financial Protection Bureau. Last week the Supreme Court agreed to hear the case of Lucia v. Securities and Exchange Commission, which concerns how administrative law judges (ALJs) of the Securities and Exchange Commission are chosen. The D.C. Court of Appeals previously ruled against Raymond J. Lucia, who argued that ALJs are officers of the United States government, which means they fall under the dictates of the Appointments Clause. This would mean the ALJs would be required to be appointed “by the president, the head of a department, or a court of law."
The Court’s decision will be watched carefully by those following the progress of another case, PHH v. CFPB. That case is attempting to determine whether the CFPB is constitutionally able to remain an independent agency headed by a single director. PHH Mortgage is arguing that the CFPB cannot be independent and that it must report directly to the President. The CFPB argues that Congress is able to structure independent agencies as it has with financial regulators and that they maintain their independence by keeping their heads in place across administrations.
Lucia was cited in February 2017 when the D.C. Court of Appeals agreed to consider the CFPB’s appeal on a previous PHH ruling by a lower court. The appeals court is expected to issue their ruling on that case soon, but now that the Supreme Court has agreed to look at Lucia, they could hold off to see if the higher court sets a precedent applicable to the case, or if their ruling would throw out the case altogether.
The two cases are unfolding as the legal battle over leadership of the CFPB itself continues to drag on. When Consumer Financial Protection Bureau Director Richard Cordray officially resigned on November 24, 2017, he named the CFPB’s Chief of Staff, Leandra English, as the Deputy Director. He stated to the CFPB staff that she would be the Acting Director of the CFPB pursuant to the Dodd-Frank Act. However, soon after Director Cordray’s resignation, the Trump administration announced its appointment of Mick Mulvaney (Director of the Office of Management and Budget) as the Acting Director of the CFPB, pursuant to separate law called the Federal Vacancies Reform Act (FVRA).
The debate about who is proper interim head of the CFPB has continued ever since. On January 10, Judge Timothy Kelley denied English’s request for a preliminary injunction against Mulvaney, explaining in his judgment that “ .. the best reading of the two statutes is that Dodd-Frank requires that the Deputy Director ‘shall’ serve as acting Director, but that under the [Federal Vacancies Reform Act] the President ‘may’ override that default rule.”
English has requested an expedited appeal of the ruling.