DC Circuit Reverses Decision Stripping CFPB of Autonomy

The majority rejected the proposed distinction based on the FTC as a multi-member independent agency and the CFPB as a single-director independent agency as "untenable", asserting that the "distinction finds no footing in precedent, historical practice, constitutional principle, or the logic of presidential removal power".

The D.C. Circuit Court of Appeals on Wednesday repudiated the Consumer Financial Protection Bureau's lawlessness while upholding its constitutionality. This means the undermining of the agency might continue for quite some time to come. Earlier this year, after Richard Courdray stepped down as director to run for governor of OH, there was a week-long legal spat over whether Donald Trump had the authority to appoint a new director to the agency or whether Courdray's second-in-command would take over. Mulvaney has already taken several steps to de-fang the bureau's powers, requesting more input on its actions from financial companies and putting a freeze on its spending. Office of Management and Budget Director Mick Mulvaney has led the bureau since, though there even had been dispute over he or Leandra English, Cordray's chief of staff, is the rightful leader. That dispute also has wound up in federal court.

A district court judge denied granting English a temporary restraining order in December against Mulvaney, and she appealed.

The decision raises the possibility of an appeal before the Supreme Court.

Pillard's ruling deals a blow to the Trump administration, whose Justice Department met the decision with noted disappointment today.

On Wednesday, Congressional Democrats hammered Mulvaney on his payday order. Meanwhile, Rep. Jeb Hensarling, R-Texas, who heads the House Financial Services Committee and is the agency's fiercest critic, said he was "deeply disappointed". The fight over the agency's structure is part of a continuing lawsuit between the agency and a mortgage servicer, PHH Corp.

PHH and a variety of other financial companies have argued that the CFPB, born of the 2010 Dodd-Frank regulatory reform package, violates the Constitution by making its single director relatively hard to remove.

In the ruling, the appeals panel found that the provision doesn't violate the Constitution and doesn't prevent the president from performing his constitutional duty to supervise the executive branch. "Congress should create a bipartisan commission at the CFPB, in place of a sole director, to uphold the bureau's mission of consumer protection".

Cordray, who is now running for governor of OH, praised the appeals court's ruling. The CFPB has been swept up in partisan politics since its creation by the Dodd-Frank law that tightened supervision of Wall Street and the financial industry following the crisis and the Great Recession.

The embattled US Consumer Financial Protection Bureau, long a target of Republican lawmakers and industry, on Wednesday survived the latest round of legal efforts to curtail its powers.

Democrats and consumer groups defending the CFPB point to its record.

The court also made it very clear that the CFPB is subject to RESPA's three-year statute of limitations, regardless of whether it brings its case through an administrative action or through court.

  • Wendy Palmer