CFPB Decides that the CFPB Is Unconstitutional

In a newly filed brief with the Supreme Court, the Justice Department claims the Consumer Financial Protection Board's structure is unlawful.

The Consumer Financial Protection Bureau began investigating the Seila Law for potential violations of federal telemarketing regulations. Seila Law was not cooperative, however. When the CFPB issued a civil investigative demand (CID) for relevant documents, Seila failed to comply. The CFPB went to court seeking an order forcing Seila's compliance, and Seila responded by contesting the CFPB's constitutionality. According to Seila, the CFPB's structure violates the separation of powers.

In May, the U.S. Court of Appeals for the Ninth Circuit rejected Seila's arguments. Seila responded with a petition for certiorari to the Supreme Court, and prompted an unusual response.

Today, the Department of Justice filed its response on behalf of the CFPB, and it was not the typical brief in opposition. Rather than argue against granting the petition, DOJ endorsed Seila's call for certiorari, and noted that the CFPB itself now accepts the argument (which DOJ had previously endorsed) that the CFPB, as structured, is unconstitutional. Specifically, DOJ and CFPB accept the argument that the prohibition on removal of the CFPB's Director absent cause is unconstitutional.

With both Seila Law and the federal government supporting certiorari, there's a decent chance the Supreme Court will accept this case for review -- adding another potential blockbuster to what is already a stacked Supreme Court term. If so, the Court will likely appoint an amicus to argue in defense of the CFPB's constitutionality. Expect a decision on the petition later this fall.