Earlier today, the U.S. Court of Appeals for the D.C. Circuit issued a landmark decision against the CFPB, finding that the agency was unconstitutionally structured because it concentrates “enormous executive power in a single, unaccountable, unchecked Director.” However, the court stopped short of ordering a shutdown of the Bureau and instead held that the President “now will have power to remove the Director at will, and to supervise and direct the Director,” severing a provision of the Dodd-Frank Act that provided that the CFPB Director could only be removed for cause.

Particularly given that the decision is likely to be appealed, its most immediate impact may relate to the CFPB’s interpretation of its authority to initiate administrative enforcement actions under the Dodd-Frank Act. While the CFPB had argued that there is no statute of limitations for any CFPB administrative actions to enforce any consumer protection law, the D.C. Circuit flatly rejected this argument and held that the Dodd-Frank Act incorporates the statutes of limitations in the underlying statutes enforced by the CFPB.

More information on each of these issues follows.


In January 2014, the CFPB initiated (and later obtained judgment in its favor in) an administrative action against mortgage solution provider PHH Corporation and its affiliates (PHH) for violation of the Real Estate Settlement Procedures Act (RESPA). On appeal from an Administrative Law Judge, CFPB Director Richard Cordray upheld the ruling that PHH violated RESPA by illegally referring consumers to mortgage insurers in exchange for kickbacks. However, departing from the Department of Housing and Urban Development’s (HUD’s) prior interpretation of RESPA, the CFPB Director applied a new interpretation to RESPA, which (1) found inapplicable the three-year statute of limitations, and (2) resulted in an additional $109 million disgorgement penalty for PHH. PHH appealed to the U.S. Court of Appeals for the D.C. Circuit arguing that the CFPB’s status as an independent agency headed by a single Director violated the Constitution.

Key Takeaways

There are two key takeaways from this ruling:

  1. CFPB is Unconstitutionally Structured but Otherwise Constitutional

The Court of Appeals made clear that its unconstitutional ruling relates solely to the “only removable by the President for-cause provision” of the Dodd Frank Act.

“To remedy the constitutional flaw, we…simply sever the statute’s unconstitutional for-cause provision from the remainder of the statute. Here, that targeted remedy will not affect the ongoing operations of the CFPB.”

As such the CFPB will operate akin to other federal agencies headed by a single person. In theory, this means that the agency will operate under the direction and supervision of the Executive Office. In practice, the agency will be somewhat less apolitical, with each new President having more power over the agency, specifically, the power to remove the agency Director at will.

  1. The CFPB Administrative Actions are Subject to Consumer Protection Laws’ Statute of Limitations

The Court of Appeals found that Congress, under Dodd Frank, did not grant the CFPB authority to bring administrative enforcement actions after the statute of limitations has expired in the underlying statute. This goes against the CFPB’s argument that “under Dodd-Frank, there is no statute of limitations for any CFPB administrative actions to enforce any consumer protection law.” Notably, the Court of Appeals called this position absurd and its finding on this question is perhaps the most significant victory for PHH in this appeal.