For the second time in a year, judges of the Court of Appeals for the D.C. Circuit have heard arguments about the constitutionality of the structure of the Consumer Financial Protection Bureau. How the court ultimately rules will determine whether or not the head of this watchdog agency can be fired and replaced at the whim of the President.

A quick history of this dispute: When Congress created the CFPB seven years ago, it did something rare (but not unheard-of) for an independent agency — it said the Bureau’s sole Director could only be removed from office “for cause,” meaning the President would need to demonstrate to Congress that the Director had done something worthy of being dismissed.

Though there is nothing in the Constitution requiring it, most independent federal agencies have a multi-member commission. The members of those commissions can’t be fired at whim, but the President can pick and choose who on a commission will act as Chair. Then there are some top-level executive branch jobs where there is a sole Director who can be dismissed for whatever reason.

Last year, a divided three-judge panel of the D.C. Circuit ruled 2-1 that the CFPB structure is unconstitutional because it vested too much authority in one person who was not accountable to the President.

However, the CFPB petitioned the full D.C. Circuit for an en banc rehearing, and today a full panel of 11 judges heard arguments from both sides.

The judges also heard from an attorney representing the Justice Department, which went from avidly supporting the CFPB in December to arguing against it in March, and then again this morning.

PHH Corp. — a company that was fined $109 million by the CFPB in 2014 for alleged mortgage kickbacks, and whose lawsuit was the basis for the earlier D.C. Circuit ruling — argued today that the CFPB’s structure goes too far in taking away authority from the President.

However, a number of judges on the panel did not seem convinced.

“What is the power of the Presidency that is uniquely diminished in this instance?” asked one judge.

Others, like Judge Patricia Ann Millett, raised the question of whether or not there is actually more accountability with having a sole director instead of three or five commissioners.

She also pointed out that, by law, the President is often limited when it comes to nominating candidates for multi-member commissions. For example, only three of five members of the Federal Trade Commission can be of the same political party, so if there are already three candidates from the President’s party in place, they would have to name someone from outside their own party.

“Isn’t it a worse intrusion on Presidential power to say that ‘Okay, it’s rotating membership, but you have to appoint somebody from the opposite party’?” she asked. “You don’t have that here. When the Bureau Directorship comes open, as it will next year, the President has more authority than with the FTC.”

PHH responded by claiming that if the President is unable to appoint a replacement for the CFPB Director, the current Bureau head “could serve another 10 or 15 years.”

However, the attorney for the CFPB countered that the for-cause restriction on the CFPB Director only applies during the Director’s actual term. Once that term is over — which would be July 2018 — President Trump would be free to dismiss CFPB Director Richard Cordray without having to show cause.

Some judges also raised Supreme Court precedents that would seem to cast things in favor of the CFPB. In Morrison v. Olson, the nation’s highest court upheld the constitutionality of the Office of the Independent Counsel, which — like the CPFB Director — could not be fired at the whim of a President. If SCOTUS said the Independent Counsel was allowed, asked some on the panel, why not a single CFPB Director?

“What could be more powerful than an Independent Council who could indict the highest officials of the President’s cabinet?” asked Judge David Tatel. “That’s much more powerful than the Bureau, in terms of its ability to impair the power of the President.”

PHH countered that the Independent Counsel was limited in tenure and focus. Their attorney argued that while the CFPB doesn’t have the Counsel’s authority to indict cabinet members, it “does have the power to impose penalties of $10 million per violation, and that is a serious problem.”

“You keep saying it’s serious, but the question isn’t how serious it is,” responded Tatel, “but how seriously it limits the President’s power.”

Since an appellate court is bound by Supreme Court precedent, Tatel said he just didn’t see how he and his fellow judges could, based on PHH’s argument, rule that the CFPB structure isn’t allowed, “even if I agreed with you that there’s a serious risk from the for-cause provision for this Director.”

Another analogy that repeatedly popped up during today’s hearing was a comparison of the CFPB to the Federal Reserve Board of Governors. Yes, the Board has multiple members — it’s supposed to have seven but currently only had four — who serve 14-year terms.

“So no President has the authority to appoint a majority therefore to control and have his policy preferences,” noted Judge Cornelia Pillard, who pointed to a pattern in financial regulatory agencies of separation between leadership and the White House.

“As I take it, it’s consistent with the Constitution,” said Pillard, “to have those people removed for inefficiency or malfeasance in office, neglect of duty, but not have them removable because the President disagrees as a policy matter… to avoid financial cronyism in favor of faithful execution of the laws.”

Another judge raised the question of the Social Security Administration, another agency with a single person at the top who can not be fired at the President’s discretion.

“What happens to the Social Security Administrator?” asked one judge, speaking the attorney for the DOJ. “That’s a single head of a body that controls 24% of the national budget.”

“How would we write an opinion here that would say that the Director of the Bureau is constitutionally impermissible but in doing so would adopt a rule that would protect Independent Counsels, Social Security Administrators, and any others?” asked another.

The Justice Department argued against the constitutionality of the CFPB structure, saying that Director Cordray’s scope of authority is more akin to the work done by the Secretary of Labor or Treasury Secretary. By the DOJ’s interpretation (and at least one of the judges on the panel), if the CFPB were to prevail then you’d be able to argue that cabinet members can only be fired for cause.

This was immediately shot down by one judge who pointed out that, unlike the CFPB Director, “No statute says that cabinet secretaries” can only be fired for cause.

The judges also questioned whether or not you could compare the CFPB Director to someone like the Treasury Secretary, whose job goes much further than just enforcing existing laws and regulations. Cabinet members are also expected to provide the President with guidance on bigger policy issues, whereas with the CFPB, notes one judge, “There’s a charter: Do these laws, do them effectively, do them impartially, and if you’re inefficient, if you fall down on that, I’m going to remove you, but go have at it.”

Some judges were also critical of the CFPB structure, like Judge Brett Kavanagh who also wrote the original majority opinion calling the single directorship unconstitutional.

Today, Kavanagh pointed out that while the most federal agencies with commissions have already had their leadership turn over — often within the first few weeks of the Trump administration — the President won’t be able to name a new CFPB leader for more than a year, meaning he won’t be able to advance his administration’s agenda until then.

“Does the dead hand of the past president controlling the agency, does that matter?” he asked.

Kavanagh also questioned whether this effort to protect the CFPB Director could come back to bite its supporters in a few years, theorizing that a number of these same parties “when we’re here in 2022 are gonna say, ‘Oh wait, we want that CFPB Director appointed by President Trump — we want that person out.’”

The court will rule on this matter at some point in the coming months, though its decision may also be moot. The Financial CHOICE 2.0 Act, authored by bank-backed Rep. Jeb Hensarling, would effectively gut the CFPB.

If the law passes, the Bureau would need to get Congressional approval before taking enforcement action against financial institutions, revoke its authority to regulate certain financial agreements and educate consumers, put the CFPB’s public complaint database behind a wall of anonymity, and give the President authority to fire the Director whenever he wants.

Additionally, President Trump’s just-released budget proposes cutting the CFPB funding by an average of $680 million per year for the next ten years. Since the CFPB’s actual budget is less than that, the White House is effectively hoping to shut down the Bureau through the budget process.

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.