In a highly anticipated decision, the Ninth Circuit recently held that the target of a civil investigative demand from the Consumer Financial Protection Bureau (CFPB) could not avoid responding to the demand on the grounds that the CFPB itself is unconstitutional. The Ninth Circuit thus joined the en banc DC Circuit in upholding the constitutionality of CFPB’s single-director, for-cause removal structure. However, a circuit split may yet emerge with cases still pending before both the Second and Fifth Circuits raising the same issue.
In CFPB v. Seila Law LLC, the CFPB issued a civil investigative demand seeking to determine whether Seila violated the Telemarketing Sales Rule in the course of providing debt-relief service to its clients. Seila refused to comply, arguing that the civil investigative demand was invalid because the CFPB is unconstitutionally structured. According to Seila, not only was the civil investigative demand unlawful, but everything the agency has done is also unlawful because the agency’s structure violates the separation of powers. The agency is headed by a single director who can be removed by the President only for cause.