Appeals court finds CFPB structure constitutional

Ivan Schwartz
February 3, 2018

"Some other statutory issues mixed".

In the case, CFPB opponents challenged a provision of the 2010 Dodd-Frank financial overhaul legislation allowing the CFPB director to be removed only "for cause" - such as neglect of duty - and not over political differences.

The degree of control the president can exert over the CFPB remains an open question. These are the rules governing hearings and related processes conducted by the bureau itself, rather than in a traditional courtroom.

At the same time, Hensarling said, "I take great solace in the fact that Mick Mulvaney can use his unchecked, unilateral powers to continue the agency's transformation". In theory, that was meant to insulate the bureau from political influence.

The head of the Consumer Financial Protection Bureau can only be replaced for cause, a USA appeals court said Wednesday.

The U.S. Court of Appeals for the D.C. Circuit ruled 7-3 in an appeal that had contended the CFPB's independence violated the president's authority under the Constitution to "take care that the laws be faithfully executed". "We have no warrant here to invalidate such a time-tested course". "No relevant consideration gives us reason to doubt the constitutionality of the independent CFPB's single-member structure". "Independence has always been associated with financial regulators with wide latitude to oversee and steady financial markets and the national economy", the ruling says.

Kavanaugh's dissent said independent agencies hold enormous power and they "collectively constitute, in effect, a headless fourth branch of the USA government".

PHH, a nonbank mortgage lender and servicer, had appealed a 2014 decision by then CFPB Director Richard Cordray, who imposed a $109 million penalty against the Mount Laurel, N.J. company, for allegedly taking illegal kickbacks for mortgage referrals. The CFPB has said that over five years it has recovered $11.7 billion that it returned to more than 27 million harmed consumers.

"PHH won on the RESPA issue".

"This is a complete victory for PHH and the mortgage industry", said Mitch Kider, chairman and managing partner at Weiner Brodsky Kider, and a litigator for PHH.

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Acting CFPB Director Mick Mulvaney now must determine whether the premiums that PHH paid to a reinsurer were reasonable. Richard Cordray, the Obama appointee who was the bureau's first director, resigned in November, several months before his term ended.

Cordray, who gave up the position to run as a Democrat for governor in OH, was the first and only director of the consumer agency. English is now contesting that appointment in court.

The president has said the bureau has overreached in its enforcement of financial system regulations. The D.C. Circuit today made it clear: "that leadership structure is constitutional, and arguments to the contrary are wholly without merit". We thus uphold Congress' choice.

That did not seem likely.

Trump appointed Mulvaney as acting director of the CFPB on the same day, citing his authority under the Federal Vacancies Reform Act. "If much was given to the director, then much was also required". A judge ruled in early January in favor of Trump and the White House, denying English an injunction to keep Mulvaney out of the job.

The procedural uniqueness of the case makes it uncertain whether it will be appealed to the Supreme Court.

Many hailed the decision specifically for upholding the mortgage industry's interpretation of Respa.

On Wednesday, Congressional Democrats hammered Mulvaney on his payday order.

Kate Berry covers the Consumer Financial Protection Bureau for American Banker.

Other reports by GizPress

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