Another Circuit Court of Appeals has weighed in on the constitutionality of the Consumer Financial Protection Bureau’s structure, on the very day that the Supreme Court of the United States heard argument on the same question. In CFPB v. All American Check Cashing, Inc., et al, a divided panel of the Fifth Circuit held that the CFPB’s present structure does not infringe on the President’s constitutional authority as head of the executive branch.

At issue are the conditions under which the President can remove the CFPB director. The director is appointed by the President, with the advice and consent of the Senate, to a five-year term. He or she only can be removed for “inefficiency, neglect of duty, or malfeasance in office,” not policy differences or refusal to follow the President’s directives. Proponents of the CFPB say that such protection is critical to the Bureau’s independence and furthers the goal of establishing a consolidated consumer-protection regulator free from political influence. Opponents to the structure point out, however, that a President could find himself stuck with a director appointed by his predecessor, with drastically different ideas about how financial regulation should be carried out, and would have no way to influence a director that he had no authority to remove except “for cause.” This limitation, opponents claim, is an unconstitutional constraint on the President’s authority as head of the executive branch and impairs his ability to “take care that the laws be faithfully executed.”

The majority ruling in All American relied on two key cases where the Supreme Court previously has upheld “for cause” protections. In Humphrey’s Executor v. United States, the Supreme Court allowed such protection for Federal Trade Commissioners. In Morrison v. Olson, it came to the same conclusion for independent counsels. Since the Court has allowed Congress to limit the President’s removal power under some circumstances, and overturned laws only when Congress attempted to give removal authority to someone other than the President, the Fifth Circuit concluded that the CFPB’s structure is “well within the Constitutional lines drawn by the Supreme Court.” The majority also noted that the word “inefficiency” in the statute could be reasonably interpreted to include “policy disagreement.” Thus, the majority noted that it had a sound basis to uphold the statutory structure under the principle of “Constitutional Avoidance” without even addressing the separation-of-powers questions.

The dissent pointed to the broad authority concentrated in the single CFPB director as a “crucial variable in the constitutional equation,” which demanded a different result. Although the FTC is a regulatory agency with broad powers, it is governed by a number of commissioners with staggered terms, making it more difficult for a single president to appoint a long-lasting majority and providing a more bipartisan structure while maintaining independent decision-making authority. Although independent counsels are “solo actors,” the dissent pointed out that counsels had limited power in a much narrower field when compared to the sweeping authority of the CFPB, which is empowered to regulate in virtually every sector of consumer finance. These differences, said the dissent, made Humphrey’s Executor and Morrison less persuasive. Because the CFPB vests sweeping regulatory power in a single individual with a term lasting longer than the President’s, and with minimal other mechanisms for accountability, the dissent was convinced that giving the President the authority to remove the CFPB director at will was necessary to enable him to carry out his constitutional role as head of the executive branch.

The dissent also criticized the majority for not following the Fifth Circuit’s recent en banc decision in Collins v. Mnuchin, in which it found the structure of the Federal Housing Finance Agency to be unconstitutional because it granted “for cause” removal protection to the single director of a powerful agency – the very same situation present in the CFPB. Although the majority distinguished the structures of the FHFA and the CFPB on a factual basis, the dissent asserted that the differences were not legally significant and, thus, the en banc decision in Collins should have controlled the outcome of the case.

Both the opinion and the dissent provide excellent explanations and thorough analysis of the key arguments over the CFPB’s structure that have been percolating in the appeals courts, albeit supplemented with some discussion about the impact of an en banc decision on a panel in the same circuit. No doubt the Supreme Court heard many of the same arguments on the day this decision was released, as the questions presented in Seila Law LLC v. CFPB were essentially the same as those before the Fifth Circuit: “Does the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violate the separation of powers principle?” and “If it does, is 12 U.S.C. § 5491(c)(3) severable from the Dodd-Frank Act?” By June we should have an answer, one which may generate significant waves in consumer finance regulation.