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Appeals Court Upholds Independent CFPB Structure
Friday, February 2, 2018 6:45 AM

A U.S. appeals court on Wednesday ruled that the structure of the Consumer Financial Protection Bureau is constitutional and that its director can be fired by the president for cause only.

The split decision by the U.S. Court of Appeals for the District of Columbia Circuit is a blow to the Trump administration, as well as longtime Republican and financial industry critics of the agency who have argued that the CFPB’s powers need to be reined in.

“We find no reason in constitutional precedent, history, or principle to invalidate the CFPB’s independence,” according to the 68-page majority opinion written by Judge Cornelia T.L. Pillard that was joined by five other judges who concurred in the ruling.

The independent structure of the CFPB has long been at the center of a fierce partisan debate over the agency, which was created during the Obama administration in response to the global financial crisis. The CFPB is ruled by a single director rather than a multi-member commission and gets its funding from the Federal Reserve rather than Congress. The CFPB’s supporters say that structure gives the agency needed independence from political and financial pressures. But Republicans complained it has made the CFPB a rogue, unaccountable force.

“There is nothing constitutionally suspect about the CFPB’s leadership structure. . . . And there is no reason to assume an agency headed by an individual will be less responsive to presidential supervision than one headed by a group,” Pillard said.

The case revolves around a $109 million fine the CFPB levied against PHH Mortgage in 2015 for allegedly giving kickbacks to mortgage insurers in exchange for customer referrals. The New Jersey company sued, saying the penalty showed the agency had too much unchecked authority and that it should be easier for the president to fire its director.

Three judges on the appeals court panel disagreed with the decision. “The CFPB’s concentration of enormous power in a single unaccountable, unchecked Director poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than a multi member independent agency does,” Judge Brett M. Kavanaugh said in an dissenting opinion.

The ruling offers some stability to an agency that is still caught in a legal tug-of-war over its leadership. Late last year, the agency’s longtime director, Cordray, stepped down and named his former chief of staff, Leandra English, acting director. But just hours later, the White House appointed Mick Mulvaney, the director of the Office of Management and Budget, to the job. English is contesting Mulvaney’s position in court.

Read more at Washington Post.