WASHINGTON–A federal appellate court here said it will review a lower court decision that found the structure of the Consumer Financial Protection Bureau is unconstitutional, which will also at least temporarily undo a ruling that the president can fire the agency's director at will.
The case has been much watched in both the financial services industry and Congress, where various proposals ranging from defunding the agency to changing its single director leadership to a five-person board have all been debated and proposed.
The U.S. District Court of Appeals had ruled in October 2016 that the CFPB’s structure is unconstitutional, because it is headed by a single director—Richard Cordray—rather than a multi-member board. The full story can be found here.
In its petition filed in November, the CFPB argued against the court’s decision on grounds that it would interfere with Congress’s ability to create independent agencies led by a single director. The CFPB pointed to other independent agencies, including the Social Security Administration, the Federal Housing Finance Agency and Office of Special Counsel, to help make its case.
In its decision, the United States Court of Appeals for District of Columbia Circuit said the full court will rehear the case, PHH Corp., et al v. CFPB. The outcome of the case has significant ramifications for the Trump Administration.
The bureau's current director, Cordray, is an Obama appointee whom Republicans want replaced. Credit unions, meanwhile, have chafed at the regulatory burden the agency has put in place after it was created by the 2010 Dodd-Frank financial reform law.
Oral hearings before the full United States Court of Appeals for District of Columbia Circuit are scheduled for May 24.
Following the court’s decision, CUNA CEO Jim Nussle said the trade group “continues to advocate that the current one-size-fits-all regulatory environment isn’t working. Creating a commission of multiple voices to lead the bureau will allow the bureau to function in the best interests of consumers well into the future.”
Dan Berger, CEO of NAFCU, said his group will “continue to monitor the developments in this litigation.”