The CFPB is seeking a CID from the firm concerning, among other things, information on the fees the company charges to consumers for debt relief and marketing methods for debt relief or other services.

“This action to enforce a civil investigative demand has been ratified by two successive heads of the Consumer Financial Protection Bureau who were removable at will by, and thus fully accountable to, the president,” CFPB General Counsel Mary McLeod said in a recent brief. “Either ratification alone would fully resolve Seila Law’s objection that, at the time this action was filed, it was not overseen by such an official. Nor would any legitimate purpose be served by setting aside the CID at this point. To the contrary, doing so now that it has been approved by two officials subject to the president’s plenary supervision would undermine the very Article II authority that the Supreme Court sought to protect in this case. This court should grant the bureau’s petition and enforce the CID.”

The law firm appealed the CID and made a case for abolishing the bureau and every regulation enacted by it. 

The Supreme Court heard the case March 3 and later determined the CFPB’s single-director, for-cause removal structure is unconstitutional because it violates the separation of powers. However, the court found that the structure can be saved by striking out the for-cause termination provision.

Meanwhile, the panel remanded the CID issue back to the Ninth Circuit to determine whether it was valid or not. 

The case is Seila Law, LLC v Consumer Financial Protection Bureau (Ninth Circuit Court of Appeals, 17-56324).

Seila Law argued the CID should not be enforced because the removal provision in the bureau’s statute rendered the director insufficiently accountable to the president.

“Now that the Supreme Court has held the removal provision invalid, but severable, this objection has been put to rest going forward,” McLeod said in the brief. “The bureau is indisputably led by a director removable at will by, and thus fully accountable to, the president.

“Seila Law maintains that the CID still should not be enforced because at the time this action commenced, the Supreme Court had not yet held invalid the removal provision. But any defect in the initiation of this action has also been resolved: The CID, and this action to enforce it, have now been formally and expressly ratified by not one but two bureau officials removable at will by the president. As this circuit has already held, such ratification cures any lingering Article II problem with the initial filing of this suit. The CID should be enforced.”

The CID enforcement action was first ratified March 16, 2018, by then-acting director Mick Mulvaney, who was removable at will by the president because he also served as the director of the Office of Management and Budget.

It was ratified a second time July 9, 2020, by Director Kathy Kraninger, after the Supreme Court held in Seila Law that she is removable at will by, and thus fully accountable to, the president.

“Although Seila Law previously disputed whether the first ratification in fact took place, the bureau has now documented both that ratification and Director Kraninger’s,” McLeod added. “Nor could Seila Law reasonably dispute the formal sufficiency of these documents.”

The CFPB next argued that setting aside the CID at this point would serve no valid purpose.

“Again, Seila Law has now received a remedy that neatly fits the scope of its constitutional objection,” McLeod wrote. “The remedy is also one that is appropriately tailored to take into account the legitimate interests of the bureau and of the consumers who are or have been affected by the scheme under

investigation. Declining to enforce the CID at this point would harm these significant interests by further delaying the progress of the bureau’s legitimate law-enforcement investigation.

“This is also not a case in which a more sweeping remedy is needed in order to deter some type of bad conduct on the part of the bureau: The bureau has simply come to court seeking resolution of its dispute with Seila Law over the CID, in keeping with its statutorily mandated duty to enforce the federal consumer laws.”

In addition, McLeod said setting aside the CID now could raise doubts about the validity of other actions the bureau has taken over the past decade and that a fully accountable director now also has ratified.

“These actions include, for example, regulations governing the nation’s multitrillion-dollar mortgage market,” she said.  

McLeod then cited Justice Clarence Thomas’s partial dissention in the case that even if Mulvaney had “properly ratified” the CID and this action, he logically could not have “ratif[ied] the continuance of the enforcement action by his successor, Kraninger,” after she replaced him as head of the bureau.

“Justice Thomas would therefore have simply denied the petition to enforce the CID,” McLeod wrote. “The majority, of course, did not embrace that view. And its factual premise (that some portion of this proceeding has not been ratified) no longer holds in any event, since Director Kraninger has now herself approved this action.

“Thus, even if this court were inclined to think that Seila Law suffered some discrete form of harm merely from having to continue litigating this case in between when the first ratification fixed the problem with the suit’s initiation and when the Supreme Court fixed the problem with the removal provision going forward, that harm was fully remediated by Director Kraninger’s ratification.”