Judges divided over consumer agency power

Federal appeals judges are divided as they hear arguments over whether the president should be able to more easily fire the head of the government’s consumer finance watchdog agency.

The U.S. Court of Appeals for the District of Columbia, in a rare hearing Wednesday by all its judges, took up the politically charged case involving the Consumer Financial Protection Bureau and the power of its director. The judges are reconsidering a ruling last fall by a divided three-judge panel that would make it easier for President Donald Trump to fire CFPB Director Richard Cordray. He was appointed in 2011 by President Barack Obama.

Lawyers for the Trump administration and a company sanctioned by the consumer agency argued that the way the CFPB was created, by Obama and Democrats in Congress after the financial crisis, violated the Constitution, by giving the director excessive power.

The 10 judges — six appointed by Democratic presidents and four by Republicans — appeared split along ideological fault lines as they challenged, in turn, the opposing arguments put forward by the Trump administration and the CFPB.

In an unusual turn, the Trump Justice Department is opposing the consumer watchdog agency within its own government.

“This agency goes further than anything Congress has attempted to do in history,” declared Ted Olson, the prominent attorney with Supreme Court victories who represents the mortgage lender in this case, PHH Corp. The company was accused of illegal conduct by the CFPB and was ordered to pay $109 million, then struck back by bringing the case that has raised constitutional issues and moved up to the nation’s second most influential court.

The appeals panel ruled in October that the way the CFPB is organized violates the Constitution’s separation of powers by limiting the president’s ability to remove the director. The law creating the CFPB allows its director to be removed only “for cause” — such as neglect of duty — and not over political differences. The judges said that conflicts with the Constitution, which allows the president to remove officials for any reason.