CFPB Has Its Day In Court

Constitutional after all?

The Consumer Financial Protection Bureau got a win (and depending on which side of the argument you favor, so did consumers) when a U.S. appeals court, admittedly divided, seemed to give the edge to the argument that the CFPB’s current structure does not violate the U.S. Constitution.

As has been widely noted, the case heard via oral arguments on Wednesday (May 24) by the 11 member panel, six of them appointed by Democratic and five by Republican Presidents, is one that asks the court to reconsider a 2016 ruling that the CFPB’s very makeup, and the powers given to director Richard Cordray remain unconstitutional. That argument takes as a driving force the fact that the director can be fired by the President of the United States for cause but not at will.

The Bureau was founded in the wake of the 2010 Dodd-Frank legislation and came out as a response in part to the financial crisis that hit in 2008.

Should the CFPB be, in fact, judged constitutional, the White House and the Congress would lose a major leg of their argument to dismantle the agency and remove Cordray before his 2018 term expiration.  Another criticism by those CFPB opponents is that it wields too much power in delving into lending and other business practices of credit card firms, debt collectors and others.

Reuters reported that under questioning tied to the case, known as PHH Corp. vs. CFBP, Theodore Olson, the lawyer for the plaintiff, stated that there were several key points that make CFPB unaccountable, including the fact that its budget is not controlled by Congress. “This agency goes further than anything Congress has ever attempted to do in history,” he said to the court.

But during the hearing, reported sources, including the newswire, there may have been some leaning toward the argument that constitutionality is, in fact, a hallmark of the CFPB structure. Reuters stated that Judge Patricia Millett (who’d been appointed by former President Barack Obama) observed that the single director structure may give increased presidential power over the agency, due to the fact that a board with several directors might presumably be less accountable than the current single individual structure.

Conversely, Brett Kavanaugh (appointed by President George W. Bush), who’d been the judge behind the 2016 opinion that found it unconstitutional, said that the current administration is in effect bound (along with the five-year terms) by the “dead hand of the past president,” when it comes to policy.

No ruling was expected as of Wednesday afternoon.