President’s Power to Oust Consumer Watchdog’s Chief Is Curbed by Court
The Consumer Financial Protection Bureau’s director can only be fired by the president for cause, a federal appeals court ruled on Wednesday, restoring security to a job that has become a political lightning rod.Posted — Updated
The Consumer Financial Protection Bureau’s director can only be fired by the president for cause, a federal appeals court ruled on Wednesday, restoring security to a job that has become a political lightning rod.
When Congress created the bureau seven years ago, it specified that the director — after being nominated to a five-year term by the president and confirmed by the Senate — could only be removed for “inefficiency, neglect of duty or malfeasance.” That standard differs from those in effect at most other federal agencies, whose leaders can typically be removed at will by a president.
Last year, a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia found the bureau’s setup to be unconstitutional. On Wednesday, the full circuit court issued a ruling that vacated the earlier decision and upheld the constitutionality of the consumer bureau’s structure.
There is “no constitutional defect” in the unusual independence that lawmakers granted to the bureau’s director, the ruling issued on Wednesday said. 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.”
The Trump administration had argued in a court brief that the president should have the power to remove the agency’s leader at will. A Justice Department official said, “We are disappointed in the decision and reviewing our options.”
The ruling, which can be appealed to the Supreme Court, stems from a lawsuit filed by mortgage lender PHH Corp. challenging the scope of the bureau’s authority and a $109 million fine levied against the company. PHH did not immediately respond to a request for comment about the ruling, which left in place an earlier decision throwing out the fine.
The appeals court decision came too late to protect the suit’s initial target, Richard Cordray, who resigned in November. Cordray, a Democrat appointed by President Barack Obama, took an aggressive approach to regulation that made him unpopular with the financial industry.
Cordray’s departure allowed President Donald Trump to install his own acting director at the agency, Mick Mulvaney, the White House budget director. Mulvaney has dropped some of his predecessor’s lawsuits and investigations, delayed new rules from taking effect and called for more “humility and prudence” at the bureau.
A spokesman for the bureau said, “We are analyzing the decision.”
Mulvaney’s appointment is also the subject of a continuing court battle that the Trump administration has prevailed in so far.
Cordray, who is now running for governor of Ohio, praised the appeals court’s ruling.
“Much more to be said, but today’s decision is all about maintaining independent law enforcement free from politics,” he wrote on Twitter.
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