House engages in heated debate about constitutionality of the CFPB


On March 21, 2017, the House Financial Services Committee’s Subcommittee on Oversight and Investigations conducted a hearing entitled “The Bureau of Consumer Financial Protection’s Unconstitutional Design.” The hearing featured four witnesses: Ted Olson, Saikrishna Prakash, Adam White, and Brianne Gorod. The hearing is archived and can be viewed here.

Rather than allowing the witnesses to offer their expertise on the CFPB’s constitutionality and design, House Republicans and Democrats on the subcommittee used the hearing as a platform to express their opinions of the virtues of the CFPB’s mission and accomplishments rather than evaluating and critiquing the agency’s constitutionality.

In general, Democratic subcommittee members avoided addressing the constitutional issue altogether, instead focusing on the Bureau’s accomplishments. Democratic members cited the approximately $12 billion in fines and redress that the CFPB has imposed and the agency’s efficacy when it comes to deterring the financial services industry from taking advantage of consumers.

Al Green, a Democrat from Texas, condemned the hearing entirely, claiming that he found it troubling that the subcommittee would hold the hearing with the PHH case pending before the DC Circuit. Further, Mr. Green pointed out Ted Olson’s role as lead counsel for PHH in its legal battle with the CFPB and alleged that his testimony before the subcommittee constituted a conflict of interest.

Republicans on the other hand, argued that the CFPB has had detrimental effects on the financial services industry, which include reduced access to credit, a larger unbanked population, and overwhelming challenges for small businesses in the financial industry that do not have the resources necessary to meet their compliance obligations.

Trey Hollingsworth, a Republican from Indiana, and House Financial Services Committee Chairman Jeb Hensarling countered Democratic members’ arguments that focused heavily on the results of the CFPB, by emphasizing the importance of the CFPB achieving results through the right process.

Republican subcommittee members used the majority of their time to ask Mr. Olson questions focusing on constitutional issues. During the course of the hearing Olson repeatedly suggested that the CFPB’s lack of oversight and accountability is unlike any other agency. Two other witnesses, Saikrishna Prakash and Adam White, express opinions much like Olson’s. All three witnesses agreed that if the DC Circuit permits the CFPB’s structure to remain unchanged, there is nothing left of the separation-of-powers doctrine.

Unfortunately, the hearing did not provide any clarity regarding the constitutionality of the CFPB. Regardless, that decision is ultimately in the hands of the DC Circuit. Earlier this month, PHH filed its opening brief and asked the court to “strike down the CFPB in its entirety.” The following week, Trump’s DOJ submitted an amicus brief arguing that the President should be able to fire the CFPB Director at-will. CFPB’s opening brief is due March 31 and oral arguments are set for May 24.