There has been substantial publicity about a decision by a federal judge of the Southern District of New York that the structure of the Consumer Financial Protection Bureau violates the United States constitution. This is far from being the end of the CFPB, however.
Recognize this decision was issued by a federal district court judge. While district court judges have tremendous power, their decisions are subject to review by circuit courts of appeal and by the United States Supreme Court. The decision by the judge in the Southern District of New York is not the first time there has been a finding that the structure of the CFPB is unconstitutional. A panel of the D.C. Circuit Court of Appeals issued a similar ruling last year. However, that was overruled by an en banc decision (meaning a decision on behalf of the entire group of judges of the circuit) which held that the CFPB structure is constitutional.
Even the judge in the Southern District of New York was not expansive in her ruling. She issued no order that would have shut down the CFPB entirely. Her decision only applied to the case before her.
There is still a possibility of appeal of that decision to the Second Circuit Court of Appeals. And if the Second Circuit Court of Appeals rules as the District Court judge did (or if a similar decision is rendered in cases that the Fifth and Ninth Circuit Courts of Appeals are expected to hear) that simply sets up a circuit split. That means the Supreme Court of the United States may look favorably on hearing the case to resolve the split if the Supreme Court takes the case.
There are substantial roadblocks to a judicial ruling that the CFPB is unconstitutional. The solution for this is for Congress to act to restructure the CFPB from a one director bureau to a commission like the Federal Trade Commission where there are three commissioners from one party and two commissioners from another. That legislation is stuck in legislative limbo.
And even if the structure of the CFPB is ruled unconstitutional, and there is no change to make it a commission, there is still an opportunity to solve the constitutional problem by making the director removable by the President. This makes it an executive agency subject to executive authority. Democrats may find this to be palatable if they believe they can defeat President Trump in 2020, and this will give them the opportunity to remove the Trump appointee running the CFPB.
As we have pointed out often in past stories, federal agencies tend to have perpetual life. Once established, they do not go away.