Appeals court upholds structure of USA consumer bureau

Gladys Abbott
February 3, 2018

The court added: "Congress's decision to provide the CFPB director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will". Yet it also prevents the president from having greater control over the CFPB once a new chief is installed.

This ruling might not be the last word on the CFPB.

"We continue to believe that we complied with RESPA and other laws applicable to our former mortgage reinsurance activities in all respects", PHH said, using an abbreviation for the Real Estate Settlement Procedures Act of 1974. In theory, that was meant to insulate the bureau from political influence.

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

Though a District Court in Washington ruled that Mulvaney's appointment passed legal muster, English has appealed that decision to the DC Circuit. "We have no warrant here to invalidate such a time-tested course". The independence of CFPB's structure and funding stream has been the key to its success.

The court cited examples of other federal financial regulators that Congress deemed to be independent, including the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Securities and Exchange Commission.

The independent structure of the CFPB has always been at the center of a fierce partisan debate over the agency created under the Obama administration after the financial crisis.

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In a review of the court's previous decision in PHH vs. CFPB, the full panel held that the CFPB can exist as an independent agency with a sole director only fireable by the president for "inefficiency, neglect of duty, or malfeasance" without violating the Constitution's limits on executive power.

"PHH won on the RESPA issue".

Mulvaney has also stopped enforcing the Bureau's payday loan rule-one forcing short-term high-interest lenders to determine if borrowers can afford their products.

House Financial Services Committee Chairman Jeb Hensarling, R-Tex., called for an appeal to the Supreme Court, though it was unclear whether PHH or the Justice Department would challenge the ruling. If this ruling stands (it may be appealed all the way to the Supreme Court), all it may do in the short-to-medium run is ensure that a Trump appointee can remain in office past 2020, even if a Democrat wins the presidential election.

The second highest court in the country overturned a ruling that would have deprived the Consumer Financial Protection Bureau of independence. "At least for the time being, I see no Democratic initiative to change the structure of the CFPB". The court in October had upheld a challenge to the structure but agreed to rehear the case.

That did not seem likely.

His resignation sparked a fight over who would serve as acting director until a permanent replacement is nominated by President Donald Trump and then confirmed by the Senate. The lawsuit, while a nice victory for the long-term independence of the bureau, won't do anything to make things better for consumers in the here and now.

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