Justice Department Calls Consumer Financial Protection Bureau's Structure Unconstitutional

20 March, 2017, 11:18 | Author: Oscar Goodwin
  • Consumer Financial Protection Bureau Director Richard Cordray

Cordray has said he would not step down, and some legal scholars have said the ongoing case could present problems for Mr. Trump if he tried to remove Cordray.

On Friday the Justice Department opposed the Consumer Financial Protection Bureau in a court case, calling the independent consumer regulator's structure unconstitutional.

The CFPB is in the midst of a fight to keep its structure, which keeps the bureau's director protected from political interference, the The Wall Street Journal reports.

"There is a greater risk that an "independent" agency headed by a single person will engage in extreme departures from the President's executive policy", the brief reads.

The department also said that because CFPB directors hold five-year terms, a president may not get a chance to appoint someone who agrees with him. This would likely benefit President Trump, who has expressed a desire to replace current director Richard Cordray with someone who might be more business-friendly.

But Democrats and consumer advocates said a commission would make the bureau less effective. It's unclear how the court will rule. The agency says it has delivered $11.7 billion of "relief to consumers" since its creation, including $3.6 billion in direct compensation to consumers and $7.7 billion in principal reductions, canceled debts and other consumer relief.

The Democratic-controlled 111th Congress created the CFPB as part of the Dodd-Frank Act in the wake of the 2008 financial crisis. The director's term being five years was another complication. But critics, including Republican legislators, say they give the agency, and its director, too much power.

Instead, the Justice Department could only file a brief supporting the CFPB's opponent, mortgage company PHH Corp. Mr. Cordray, the CFPB director, took a more critical view of the violation, and imposed a $109 million sanction.

The U.S. Court of Appeals for the Washington, D.C., circuit ruled in October that the CFPB's structure is unconstitutional.

The United States limits its brief to the issue of whether the limitations on the President's removal authority recognized by the U.S. Supreme Court in Humphrey's Executor v. U.S., 295 U.S. 602 (1935), apply beyond multi-member regulatory commissions to an agency headed by a single Director.

The Trump administration Friday officially joined a legal challenge aimed at sharply reducing the authority of a federal consumer watchdog that has drawn praise and criticism for cracking down on mortgage abuses, banking irregularities, and other alleged financial wrongdoing. But the CFPB will be fighting that battle without the backing of the DOJ.

But while the DOJ's brief will likely be taken seriously, the outcome of the appeal is uncertain. Oral arguments are set to begin May 24.


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