The D.C. Circuit held today that the single-director structure of the CFPB violates Article II of the United States Constitution, and added important substantive rulings on the Real Estate Settlement Procedures Act (RESPA).

The issue presented in PHH Corp. v. Consumer Financial Protection Bureau, Case No. 15-1177 (Oct. 11, 2016), was “Whether, under Article II of the Constitution, Congress can create an independent agency headed by a single director, removable by the President only for cause.” The opinion, authorized by Circuit Judge Kavanaugh, began with emphasizing the “grave threat to individual liberty” that “[t]he U.S. Government’s executive power to enforce federal law against private citizens” can represent. Discussing the long history of separation of powers, the Court went on, “no independent agency exercising substantial executive authority has ever been headed by a single person. Until now.”

The Court ultimately held that “This new agency, the CFPB, lacks [a] critical check” that a multi-member structure would provide, “yet wields vast power over the U.S. economy,” adding, “So ‘this wolf comes as a wolf.’” (Quoting Morrison v. Olson, 487 U.S. at 699 (Scalia, J., dissenting).) In other words, the Court held that “the CFPB is unconstitutionally structured.”

This does not mean that the Court agreed that the CFPB should be shut down, however. Instead, the Court held that “Supreme Court precedent dictates another remedy”: severing a problematic provision permitting removal of the director only for cause, from the rest of the statute. With that provision excised, the Court held that “the President now will have the power to remove the Director at will, and to supervise and direct the Director. The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person.”

Finally, the Court agreed with PHH’s substantive arguments about RESPA:

(1) “Section 8 of the Act allows captive reinsurance arrangements so long as the amount paid by the mortgage insurer for the reinsurance does not exceed the reasonable market value of the reinsurance”;

(2) “the CFPB departed from the consistent prior interpretations issued by the Department of Housing and Urban Development, and that the CFPB then retroactively applied its new interpretation of the Act against PHH, thereby violating PHH’s due process rights,” thereby “violat[ing] bedrock principles of due process”; and

(3) “a three-year statute of limitations applies to all CFPB enforcement actions to enforce Section 8, whether brought in court or administratively.”