Consumer Fin. Prot. Bureau v. All Am. Check Cashing, Inc.

952 F.3d 591

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff - Appellee

v.ALL AMERICAN CHECK CASHING, INCORPORATED; Mid-state Finance, Incorporated; Michael E. Gray, Individually, Defendants - Appellants

No. 18-60302

United States Court of Appeals, Fifth Circuit.

FILED March 3, 2020

Lawrence W. DeMille-Wagman, Christopher J. Deal, Consumer Financial Protection Bureau, Washington, DC, for Plaintiff-Appellee.

Theodore Olson, Jeremy Max Christiansen, Joshua Seth Lipshutz, Esq., Lochlan Francis Shelfer, Helgard Clarice Walker, Esq., Gibson, Dunn & Crutcher, L.L.P., Washington, DC, Bentley Edd Conner, Canton, MS, Michael Verdier Cory, Jr., Esq., Dale Danks, Jr., Esq., Danks, Miller & Cory, Jackson, MS, for Defendants-Appellants.

Kyle Douglas Hawkins, Office of the Attorney General, Office of the Solicitor General, Austin, TX, for Amici Curiae State of Texas, State of Arkansas, State of Georgia, State of Indiana, State of Kansas, State of Louisiana, State of Michigan, State of Nebraska, State of Oklahoma, State of South Carolina, State of Tennessee, State of Utah, State of West Virginia, Paul R. Lepage, Governor of Maine.

Ilan Wurman, Arizona State University, Sandra Day O'Connor College of Law, Phoenix, AZ, for Amicus Curiae Separation of Powers Scholars.

Oliver J. Dunford, Pacific Legal Foundation, Palm Beach Gardens, FL, for Amicus Curiae Pacific Legal Foundation.

Andrew John Pincus, Mayer Brown, L.L.P., Washington, DC, for Amicus Curiae Chamber of Commerce of the United States of America.

Marc Gottridge, Allison Michele Wuertz, Esq., Hogan Lovells US, L.L.P., New York, NY, Ilya Shapiro, Esq., Cato Institute, Washington, DC, for Amicus Curiae Cato Institute.

Elizabeth Bonnie Wydra, Chief Counsel, Constitutional Accountability Center, Washington, DC, for Amicus Curiae Current and Former Members of Congress.

Katharine M. Mapes, Jeffrey Michael Bayne, Esq., Spiegel & McDiarmid, L.L.P., Washington, DC, for Amici Curiae Harold H. Bruff, Gillian E. Metzger, Peter Shane, Peter L. Strauss, Paul R. Verkuil.

Scott Lawrence Nelson, Allison M. Zieve, Public Citizen Litigation Group, Washington, DC, for Amici Curiae Public Citizen, Incorporated, Public Citizen, Incorporated, Center for Responsible Lending, Consumer Federation of America, Consumers Union, National Association of Consumer Advocates, National Consumer Law Center, Tzedek DC, United States Public Interest Research Group Education Fund.

Colin Michael Watterson, Susman Godfrey, L.L.P., Houston, TX, for Amicus Curiae Appleseed Foundation, Incorporated.

Before HIGGINBOTHAM, SMITH, and HIGGINSON, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

In Collins v. Mnuchin , our court was explicit that its holding on the constitutionality of the FHFA’s structure was not inconsistent with the D.C. Circuit’s holding in PHH Corp. v. CFPB , 881 F.3d 75 (D.C. Cir. 2018). See Collins , 896 F.3d 640, 672–74 (5th Cir. 2018) ; Collins , 938 F.3d 553, 588 (5th Cir. 2019) (en banc) (reinstating the relevant portion of the Collins panel majority decision). Persuaded by the thoughtful and reasoned analysis of that circuit and the Ninth Circuit, which addressed the same question in CFPB v. Seila Law LLC , 923 F.3d 680 (9th Cir. 2019), cert. granted , ––– U.S. ––––, 140 S. Ct. 427, 205 L.Ed.2d 244 (2019), I conclude that the restrictions on the President’s removal authority under the Consumer Financial Protection Act are valid and constitutional.

The issue is both fundamental and contestable, and it is not an issue that has been clearly answered by existing Fifth Circuit precedent, though I am persuaded that our existing precedent does not compel a contrary conclusion. See Collins , 896 F.3d at 673 (highlighting the "salient distinctions" between the CFPB and the FHFA that make the court’s reasoning in Collins consistent with the reasoning in PHH ). Therefore, I look forward to its likely resolution by the Supreme Court. As my colleagues are aware, my own preference in this specific, post- Collins case would have been to hold our matter several months in abeyance.¹ That preference was unpersuasive for reasons I respect and, indeed, I now am confident that views they may choose to elaborate will offer new insights to the Supreme Court.

Three circuits have now weighed in on this important question, and the Supreme Court will benefit from those perspectives, as well as the comprehensive and well-reasoned brief of court-appointed amicus curiae. Given the many eloquent voices that have spoken on this question—in majority, concurring, and dissenting opinions—I see little reason to "re-plow the same ground here," Seila Law , 923 F.3d at 682.

Thus, finding that neither the text of the Constitution nor the Supreme Court’s previous decisions support the Appellants’ arguments that the CFPB is unconstitutionally structured, the district court is AFFIRMED.

PATRICK E. HIGGINBOTHAM, Circuit Judge, joined by STEPHEN A. HIGGINSON, Circuit Judge, concurring:

In the wake of the 2008 financial crisis, a special commission formed by Congress found that "failures in financial regulation and supervision" had "proved devastating to the stability of the nation’s financial markets."¹ The consumer-protection system, with its "seven different federal regulators," was "too fragmented to be effective."² Congress concluded that in the run-up to the recession these regulators "had failed to prevent mounting risks to the economy, in part because [they] were overly responsive to the industry they purported to police."³

Congress responded. It created the Consumer Financial Protection Bureau ("CFPB" or the "Bureau"), "a new, streamlined independent consumer entity housed within the Federal Reserve System."⁴ In placing the federal consumer-financial protection apparatus under the roof of a single agency with civil enforcement power, Congress sought increased accountability, consistency, and escape from regulatory capture, ultimately ensuring "that markets for consumer financial products and services are fair, transparent, and competitive."⁵

To that end, the Consumer Financial Protection Act ("CFPA") created the Bureau and tasked the new entity with "implement[ing] and, where applicable, enforc[ing]" eighteen preexisting consumer-protection statutes.⁶ It also charged the Bureau with taking enforcement actions against "unfair, deceptive, or abusive" practices related to consumer financial products and services, such as retail banking, payday lending, and financial data processing, to name a few.⁷ As needed, the Bureau may promulgate rules, issue orders and guidance, and supervise banks, payday lenders, and other covered entities.⁸ The Bureau also has tools for conducting investigations and administrative discovery, including the power to issue subpoenas and civil investigative demands.⁹ And it may hold hearings and conduct adjudications, as well as bring civil enforcement actions in court through its own attorneys and in its own name.¹⁰

Drawing on familiar features of agency design, Congress centralized control of the new agency by handing the reins to a single CFPB director appointed for a five-year term by the President with the advice and consent of the Senate and removable by the President for "inefficiency, neglect of duty, or malfeasance in office."¹¹ Like other financial regulators, the CFPB’s funding does not flow from annual congressional appropriations.¹² Instead, the director requests from the Federal Reserve Board of Governors "the amount determined ... to be reasonably necessary to carry out the authorities of the Bureau" each year,¹³ capped by statute at twelve percent of the Federal Reserve System’s budget.¹⁴

While consolidating the dispersed enforcement regime with its vulnerability to agency capture, Congress remained attentive to the nigh axiom that financial regulators work most effectively with a measure of independence attending the accountability of executive oversight.¹⁵ The result was a CFPB overseen by the Financial Stability Oversight Council ("FSOC"), which has veto power over any rule it concludes will "put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk."¹⁶ The President appoints a majority of the FSOC’s members, all experts in banking, finance, or insurance.¹⁷ "Thus, if the Director’s decisionmaking goes awry on a critical rulemaking, a multi-member body of experts can step in" to correct it.¹⁸ In sum, the line of authority runs directly to the President.

I.

In 2016, the CFPB filed this civil enforcement action against two Mississippi-based check-cashing and payday-lending entities and their owner, Michael Gray (collectively, the "Payday Lenders") in the Southern District of Mississippi.

The complaint alleged that the Payday Lenders had engaged in "unfair, deceptive, or abusive act[s] or practice[s]"¹⁹ by, among other things, "refusing to disclose [their] check cashing fee," unlawfully "retain[ing] overpayments made by consumers," and "misrepresent[ing] the amount and number of fees associated" with their lending services. From 2011 to 2017, the Payday Lenders "charged more than 46,000 consumers more than $5.4 million in [unauthorized] check-cashing fees"—just one of the ways they allegedly fleeced consumers. Over this period, Gray, their owner, assertedly paid himself "more than $13.5 million in compensation," plus salaries to his wife, seven-year-old son, and six-month-old daughter.

The Payday Lenders responded that the CFPB is unconstitutionally structured and that any enforcement action it initiates is void from its inception.²⁰ Looking to the D.C. Circuit’s then-recent en banc opinion in PHH Corporation v. CFPB ,²¹ the district court denied the Payday Lenders’ motion to dismiss, holding that "the Bureau is not unconstitutional based on its single-director structure." The district court then certified its order for interlocutory appeal, observing that this case presents "substantial ground for difference of opinion."²²

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