Trump Administration OK With CFPB but Wants Power to Oust Chief

By Andrew Harris, Bloomberg News

President Donald Trump’s administration told a U.S. appeals court that it wants the power to fire Consumer Financial Protection Bureau Director Richard Cordray, but that doesn’t mean it wants the agency disbanded.

The Justice Department staked out that position Friday in court documents filed at the U.S. Court of Appeals in Washington, which is getting ready to rehear a case challenging the authority of the CFPB and the man who leads it.

The administration position is close to that of PHH Corp., the Mount Laurel, New Jersey-based mortgage company that sued to overturn a $109 million penalty imposed by the CFPB. The documents show that the administration has also entered into an officially adversarial relationship with the head of one of its constituent agencies — an appointee of former president Barack Obama.

Born of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB was endowed with a funding source independent from the congressional appropriations process and has been led by a single director — as opposed to a commission — who can only be fired for inefficiency, neglect or official wrongdoing.

Since then, Democrats have praised how the bureau has extracted more than $11 billion from businesses it’s pursued for allegedly unfair, deceptive or abusive practices. But the CFPB has also gained enemies among Republicans and legal challenges from finance companies along the way including PHH, which sued in 2015.

Trump, though pressed by bankers and allies within his party, has thus far refrained from taking action against the Democrat Cordray, a former Ohio attorney general whose term expires in July 2018.

Penalty Tossed

A three-judge panel threw out the contested PHH penalty in October, rejecting the bureau’s underlying justifications for it. But more significantly, its 2-1 majority agreed with PHH that the CFPB structure provided insufficient checks on Cordray’s authority. While the company’s lawyers asked that the agency be dissolved, the judges decided the appropriate remedy was to make the director fireable at any time for any reason.

In February, the court granted a request from the CFPB’s in-house lawyers to rehear the case before an expanded panel of judges, wiping out the prior ruling and setting an argument date of May 24. It later took the unusual step of granting the administration’s request to file a friend-of-the-court brief — an argument made by parties not involved in the litigation in support of one of the sides.

The Trump administration, in its filing agreed with the court’s original conclusion.

“A removal restriction for the director of the CFPB is an unwarranted limitation on the president’s executive power,” the government’s lawyers told the court, adding the panel need not find the entire agency and its operations unconstitutional.

The case is PHH Corp. v. Consumer Financial Protection Bureau, 15-1177, U.S. Court of Appeals, District of Columbia Circuit (Washington).

–With assistance from Elizabeth Dexheimer.

For more news, visit Bloomberg.

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