Full DC Circuit upholds structure of Consumer Financial Protection Bureau

  • Full DC Circuit upholds structure of Consumer Financial Protection Bureau

Full DC Circuit upholds structure of Consumer Financial Protection Bureau

The CFPB may be a new agency, but the D.C. Circuit likened its powers to that of the Federal Trade Commission, whose independence the Supreme Court upheld in the 1935 case Humphrey's Executor v. Though it lost on the constitutional issue, it will be allowed to challenge a $109 million CFPB penalty, according to the National Law Journal coverage.

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. The court added: "Congress's decision to provide the CFPB director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will".

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. "Independence has always been associated with financial regulators with wide latitude to oversee and steady financial markets and the national economy", the ruling says.

But the decision, while affirming the CFPB's independence, did not let the agency off the hook entirely.

Replacing an earlier ruling that the CFPB's structure was unconstitutional and that there were insufficient checks on the power of its director, the Washington-based appeals court concluded that Congress meant to protect the agency from the ebb and flow of politics and that its director should only be dismissed for cause.

The court said the CFPB had violated due process by not providing PHH with notice of its new interpretation of Respa. English is now contesting that appointment in court.

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.

"Even though I have total confidence in Acting Director Mulvaney's vision, the fact remains that no one person in America - especially someone who is unelected - should have the authority to unilaterally control whether working Americans can get a mortgage or a checking account", he continued.

Banking industry lobbyists and right-wing think tank scholars had been among those who signed friend of the court briefings urging judges to change the CFPB structure. "Because none of PHH's challenges is grounded in constitutional precedent or principle, we uphold the agency's structure".

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.

Others suggested the decision could impact a separate case challenging Mulvaney's leadership, putting the Justice Department in a bind as to whether it should appeal the PHH case. The D.C. Circuit ruling was disappointing but not surprising, Shapiro says, because the court has a history of being deferential to the government's case.

"Seeing the DC Court of Appeals has issued a strong opinion today favoring the independence of the CFPB", he wrote.