Appeals court to reconsider ruling on consumer agency
Divided panel had said last year that CFPB structure is unconstitutional
WASHINGTON - A federal appeals court said Thursday that it will reconsider its earlier ruling that would have increased the president’s authority over the government’s consumer finance watchdog agency, a target of criticism from banks and Republicans in Congress.
A divided three-judge panel ruled last year that the way the Consumer Financial Protection Bureau is organized violates the Constitution’s separation of powers by limiting the president’s ability to fire the agency director.
The earlier 2-1 decision would have given President Donald Trump the power to fire bureau Director Richard Cordray at will, a move some GOP lawmakers have sought. Cordray is a Democrat and Obama appointee whose five-year term doesn’t end until next year.
But the full U.S. Court of Appeals for the District of Columbia said it would grant a request from the bureau to throw out that ruling and hear arguments in the case again May 24.
The banking industry has viewed the bureau as a thorn in its side and accused it of overreaching in its regulation of consumer financial activities. Trump had promised during his campaign to dismantle the 2010 law that created the bureau in response to the financial crisis that struck in 2008.
The CFPB has been a political lightning rod since it was created by Congress in a major financial overhaul law to protect consumers from harmful banking and lending practices. Wall Street interests, the banking and consumer finance industries, and Republicans in Congress have fiercely opposed and criticized the agency.
The law creating the independent agency says its director can only be removed “for cause,” such as neglect of duty, and not over political differences. The three-judge panel said that conflicts with the Constitution, which allows the president to remove executives for any reason.
That problem can be solved, the panel said, by taking out the “for cause” provision — giving the president the power to remove the director at will and to supervise him or her.
Cordray has run the agency since it began operating in July 2011. His term doesn’t expire until 2018. But the court’s previous ruling would have allowed the president to fire him before then.
As the agency’s director, Cordray exercises more power than would be the case with a five-member commission, which is often the structure atop independent federal agencies. The members of such commissions normally are split between the political parties.
Under Cordray’s leadership, the agency has aggressively taken action against banks, mortgage companies, credit card issuers, payday lenders, debt collectors and others. The CFPB says that over five years it has recovered $11.7 billion that it returned to more than 27 million harmed consumers.