Consumer watchdog bureau's independence upheld by appeals court

Jon Howard
February 3, 2018

The degree of control the president can exert over the CFPB remains an open question.

Cordray himself chimed in on Twitter after word of the ruling came out. The fight over the agency's structure is part of a continuing lawsuit between the agency and a mortgage servicer, PHH Corp.

"It's a victory for the CFPB in the long-long run, but the Democrats may have to wait two or three years to replace a Trump nominee", said Eric Mogilnicki, a partner at Covington & Burling. In theory, that was meant to insulate the bureau from political influence.

Another anti-American move from the Trump Administration is the president's choice of Mick Mulvaney for acting director of the Consumer Financial Protection Bureau (CFPB).

But, after a review by the full bench of the US Circuit Court of Appeals for the District of Columbia, the majority of judges rejected this view, finding that legal precedent had established Congress's right to create agencies independent of the president.

"We find no reason in constitutional precedent, history, or principle to invalidate the CFPB's independence", the 250-page ruling said. The independence of CFPB's structure and funding stream has been the key to its success. "Independence has always been associated with financial regulators with wide latitude to oversee and steady financial markets and the national economy", the ruling says.

The independent structure of the CFPB has always been at the center of a fierce partisan debate over the agency created under the Obama administration after the financial crisis.

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A three-judge D.C. Circuit panel had issued a contrary ruling in October that found the massive power given to the CFPB director was unconstitutional.

"Ocwen seeks to get this issue resolved early, because it should be relieved of having to defend this unfair action from an unconstitutional agency", the company said last April.

The court said the CFPB had violated due process by not providing PHH with notice of its new interpretation of Respa.

When the bureau's first director, Richard Cordray, resigned this past November, just months his five-year term was set to expire, Trump thwarted an attempt by Cordray to hand the agency's reigns to his deputy, Leandra English.

House Financial Services Committee Chairman Jeb Hensarling, R-Tex., called for an appeal to the Supreme Court, though it was unclear whether PHH or the Justice Department would challenge the ruling. English is now contesting that appointment in court. "I take great solace in the fact that Mick Mulvaney can use his unchecked, unilateral powers to continue the agency's transformation into one that will, as he said, "exercise [its] statutory authority to enforce the laws of this nation....execute the statutory mandate of the bureau to protect consumers" and go no further'". Having a single person in charge of the CFPB is different from the pattern atop many other federal regulatory agencies of a multi-member commission, the ruling said, "but we can not downplay the fact that Congress also required extensive coordination, expert consultation and oversight of the director".

That did not seem likely.

But now, under Trump, the head of the agency has been appointed by a president who is actively hostile to the stated mission of the CFPB.

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