Americans always love a redemption story, especially where the party seeking forgiveness is a celebrity. For example, to this day, Kanye West is vilified for stepping on Taylor Swift’s moment at the 2009 MTV Video Music Awards. Notwithstanding, recently, despite having married a woman who became famous under the worst of circumstances, Kanye has literally found religion, leading revival meetings around the nation and having expressed contrition to the Swifties. As a sure sign of his sincerity, he has even suggested Kim dress less suggestively, which surely cuts against their bottomline. Now, if you are wondering how “Keeping Up with the Kardashians” intersects with collections, you need only refer to a Justice Department brief, ostensibly filed on behalf of the CFPB, where the CFPB declared itself unconstitutional.
CFPB Declares Itself Unconstitutional?
This admission against interest was greeted with a range of emotions in the collection universe, from mocking “I-told-you-sos” to utter relief. So is this a Kanye redemption moment? Has the CFPB repented of its extraconstitutional powers? Have they admitted wrongdoing in seeking liability for actions never determined illegal? More importantly, will the CFPB now rely on input of both creditor and consumer advocates?
Hardly. As always, the devil is in the details.
Having read the decision, the CFPB is not advocating to decommission itself like an unwanted nuclear reactor. In reality, it suggests a modified version of the Queen of Hearts from “Alice in Wonderland” combined with the Hydra – off with its head – and then replace the single head with several more.
It all started when a collection firm sought writ of certiorari to the U.S. Supreme Court appealing a lower court’s finding the CFPB’s structure constitutional, thereby allowing the CFPB’s Civil Investigative Demand (CID) against the firm to proceed. The firm had argued that the CFPB’s single director, removable only for “inefficiency, neglect of duty or malfeasance” violated the separation of powers of the Constitution. Surprisingly, the DOJ filed a brief in support of the writ, arguing that the President is constitutionally bound to ensure the laws are faithfully executed, so that the President’s abilities to appoint, oversee and remove executive officials were all essential to fulfill that duty. The brief also disagreed with the lower court’s finding that the CFPB’s structure was analogous to that of the FTC because both the FTC and CFPB directors were removable for cause. According to the DOJ, the CFPB, prosecutes and investigates, i.e. executive powers, while the FTC is a board with quasi-legislative and judicial powers, with staggered terms, assuring a more bi-partisan, collaborative policymaking body. Staggered terms allow Presidential appointment to the FTC which contrasts with the CFPB whose director actually serves longer than a President, shielding them from the electorate.
Part May Remain
However, the CFPB’s end is not nigh. The Credit Card Accountability Responsibility and Disclosure Act (CARD Act), consistent with precedent, explicitly allows that if one part were found unconstitutional, the remainder of the Act would survive. Importantly, the brief did not question that CIDs were constitutional because Congress can delegate its subpoena powers.
And with all things collection related, there are politics: If the Supremes agree, they punt to Congress to rewrite the Act. Who among us thinks the Democrats and Republicans are going to agree, in an election year, on the CFPB’s structure and let Trump appoint the first commissioners? Even more, imagine if Elizabeth Warren, from whose mind the CFPB erupted, is the President when Congress considers changes? All I can say to that is this: Kanye 2024!
Michael L. Starzec is a partner with Blitt and Gaines, P.C and is vicepresident of the Illinois Creditors Bar. He is a frequent speaker, writer and litigator on creditor’s rights.