Published: Mon, March 20, 2017
Economy | By Annette Adams

Trump administration sides against its own consumer watchdog agency in court

Trump administration sides against its own consumer watchdog agency in court

As now constituted, the CFPB director can only be removed for cause. In that decision, the court found the CFPB's leadership structure, specifically the lack of oversight over the director and the fact that he or she can not terminated for cause, was unconstitutional.

The agency's critics, including many Republican lawmakers, say its work hurts the industry's autonomy and often inhibits lending and other business opportunities that can boost revenues and create jobs.

The Supreme Court carved out an exception for the normal rule that all government agencies must be accountable to elected representatives with the 1935 decision Humphrey's Executor v. U.S., but since then the law has focused on ensuring such agencies have a commission structure that can reflect the makeup of Congress and the White House. The CFPB was determined to only be in sync with the Constitution if the president had the authority to hire and fire the director at will.

On Friday the Justice Department opposed the Consumer Financial Protection Bureau in a court case, calling the independent consumer regulator's structure unconstitutional.

CFPB Director Richard Cordray's term expires in July 2018.

The only exception, it states, is when a federal agency is headed by a commission. It claimed that an agency run by a single person is "unchecked by the constraints of group decision-making among members appointed by different presidents".

Though the Constitution has nothing to say regarding the structure of independent federal agencies, the DOJ now contends that the document does specify that the President is the one wielding ultimate authority in the Executive branch. Mr. Trump's advisers haven't said what, if anything, he intends to do with the agency. Oral arguments in the "en banc" review of the case will be heard by the D.C. Circuit on May 24.

If so, things could get a bit complicated. Under his leadership, the CFPB has returned almost $12 billion to 27 million Americans who have been wronged by credit card companies, payday lenders, debt collectors and other predatory financial industries.

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