Bringing PHH Full Circle: The Supreme Court’s Decision in Seila Law

Abstract

This article addresses the U.S. Supreme Court’s decision in Seila Law LLC v. Consumer Fin. Prot. Bureau, __ U.S. __, 140 S. Ct. 2183 (June 29, 2020), which bookends the D.C. Circuit’s previous decision in PHH Corp. v. Consumer Financial Protection Bureau, (which was the subject of a previous article titled Practical Takeaways From the D.C. Circuit’s Decision In PHH Corp. v. Consumer Financial Protection Bureau). The article discusses the problems the D.C. Circuit’s panel (headed by then Judge Kavanaugh) saw with the constitutional structure of the CFPB, which featured heavily in the majority opinion in Seila Law (which was joined by now Justice Kavanaugh), as well as the implications of the Supreme Court’s decision, which found the structure to be unconstitutional but remediable by severing the provisions that insulated the CFPB’s Director from removal at will by the President.

TOPICS: Financial crises and financial market history, legal/regulatory/public policy

Key Findings

• • The Supreme Court believed that too much power was concentrated in the hands of the CFPB’s Director.

• • The Supreme Court believes it solved the issue by severing the “for cause” removal provision, and that doing anything more (like dissolving the agency) would cause too much havoc.

• • The CFPB has moved quickly to retroactively ratify the majority of its rules and enforcement actions, but litigation is likely to linger in contentious enforcement proceedings.