Current and Former Texas Solicitors General Line Up Against CFPB

Texas’ current and former solicitors general are calling on the U.S. Supreme Court to take up a case that could cripple the Consumer Financial Protection Bureau.

Texas’ current solicitor general, Kyle Hawkins, is among a group of conservative state officials, including colleagues from Arkansas, Kansas and Georgia, who have signed an amicus brief Monday against the CFPB. Hawkins is also joined by Scott Keller, the former Texas solicitor general now at Baker Botts, who signed a similar brief on behalf of the Cato Institute.

Both briefs said the current structure of the CFPB is unconstitutional since it’s headed by a single director who can only be removed by the president for cause. That restriction on the president’s discretion to remove a bureau director violates the Constitution’s separation of powers.

“So the CFPB wields substantial power exercised by the fiat of a single, almost unreviewable, virtually unremovable director,” Keller wrote for Cato. “The CFPB director can issue regulations that bind any person under its jurisdiction, investigate potential violations of those regulations, prosecute actions in its own administrative tribunals, and appropriate Federal Reserve money to itself.

If the president cannot remove an agency head at will, it could create a situation where the director could ignore orders from the executive branch.

“The threat to liberty posed by the CFPB is uniquely acute. In a supposed effort to protect consumers, the Dodd-Frank Act deliberately stripped power that had been spread across ‘seven different federal regulators’ as well as their state-law counterparts,” the brief signed by Hawkins said. “Rather than shift that power to an existing department overseen by a cabinet secretary, however, the act concentrated that power in the hands of a bureaucrat who need not seek the approval either of the electorate or an elected official.”

The case is the latest to reach the Supreme Court challenging the constitutionality of the consumer bureau’s structure, an issue long pressed by business advocates and Republicans on Capitol Hill. The justices have not yet taken any case that squarely addresses the CFPB’s structure.

Seila Law, represented by Kannon Shanmugam of Paul, Weiss, Rifkind, Wharton & Garrison, is challenging a ruling from the U.S. Court of Appeals for the Ninth Circuit. Shanmugam filed a petition in the high court in June, arguing the president should have the power to remove the CFPB director at will.

“The time for this court to resolve the long-running debate about the constitutionality of the CFPB is now,” Shanmugam wrote. “The court has consistently recognized that the Constitution empowers the president to keep federal officers accountable by removing them from office.”

The Trump-era Justice Department has taken litigation positions against the single-director structure of the consumer bureau, and the government is expected to participate in the case at the Supreme Court.

In December, the Justice Department pitched the Supreme Court on taking up the issue, but only in a case that would not force Justice Brett Kavanaugh to recuse. Kavanaugh, as a D.C. Circuit judge, had assailed the “massive, unchecked power” of the CFPB.

The Justice Department’s response in the Seila Law case was due Monday, but Noel Francisco, the U.S. solicitor general, received an extension to file by Aug. 28.