MBA, Trade Groups File Amici Brief on Constitutionality of CFPB Structure

The Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders this week filed a neutral amici brief with the U.S. Supreme Court in a case that could determine the future structure of the Consumer Financial Protection Bureau.

The case, Seila Law LLC v. Consumer Financial Protection Bureau, challenges a provision in the Dodd-Frank Act that allows the director of the CFPB to be fired “for cause.” The case essentially questions whether the executive authority of the CFPB, an independent agency, violates the separation of powers. Additionally, the case asks that, if the Bureau is found unconstitutional under the separation of powers, it can severed from Dodd-Frank.

The MBA/NAR/NAHB amici brief supports severing the “for cause” requirement in Dodd-Frank but leaving the rest of the law undistributed. Put another way, said Justin Wiseman, MBA Associate Vice President and Managing Regulatory Counsel, the trade groups are not in favor of the Court striking down Title X and the Bureau, which the court may do under the theory that the independence of the Director is integral to the statutory scheme that created the CFPB and cannot be removed. 

“Our brief argues that severing the ‘for cause’ requirement is the legally appropriate remedy and invalidating the Bureau through a judicial decision would result in tremendous chaos, uncertainty and legal risk,” Wiseman said. 

The brief does not take a position on the constitutionality of the Bureau’s structure–but does not mean the brief should be taken as support for any particular action by the Bureau in the past or future. “We still remain supportive of a legislative path that would result in the Bureau being led by an independent commission,” Wiseman said. “That is not likely to be accomplished by a judicial decision and invalidating the Bureau to let the chips fall where they may is extremely problematic for the reasons outlined in the brief.”

“The real estate industry has engaged with the CFPB on rulemaking and policy issues, including by providing continuous feedback to the CFPB on how to best fulfill its statutory mandates to ensure access to financial opportunity and protect the interests of American consumers,” the brief said. “The industry also has invested billions of dollars to comply with the CFPB’s new rules, regulations, and related guidance. Today, nearly all residential real estate finance transactions in the United States are undertaken in compliance with, and in reliance on, the rights, obligations and protections set forth in the regulations and other guidance issued by the CFPB.”

The amici brief said the approaches under Seila would result in “immediate and severe disruption” to the real estate financing industry, causing significant harm to consumers and the economy at large. “When determining how to remedy an unconstitutional statute, courts seek to give effect to congressional intent and to avoid unnecessary disruption,” the brief said. “Striking down the entirety of the CFPA, or declaring it unconstitutional without addressing severance, would eliminate or call into question the legitimacy of the detailed, technical regulations that govern past and future real estate finance transactions, not to mention the authority of a federal agency responsible for enforcing a host of consumer protection laws. Such an outcome would immediately cause significant disruption to the American economy, overturning regulatory guideposts, upsetting settled expectations, and creating substantial uncertainty in our housing markets, all in contravention of Congress’s clearly expressed intent to promote financial stability. The Court should avoid causing such harm. Accordingly, in the event that the Court finds the for-cause removal provision unconstitutional, it should sever that provision from the statute.”