The Obama Administration is going to bat for the CFPB, telling an appellate court that its ruling that the agency’s structure is unconstitutional is deeply flawed.
And in court documents, the Department of Justice supports the CFPB’s efforts to convince the court to have the full Circuit Appeals Court for the District of Columbia hear the case.
The ruling came in a case in which PHH, a mortgage lender, was the subject of $109 million penalty from the CFPB. A panel of appellate court judges voided that penalty and sent the case back to a lower court for review.
In the case, the CFPB has been represented by its own attorneys. However, the appeals court invited the Obama Administration to file a brief in the case.
PHH has argued that the agency structure is unconstitutional since the director may only be removed by the president for cause—giving the director extraordinary power.
If the ruling stands, the agency’s director could be removed by the president for any reason. And the next step for any appeal would be the U.S. Supreme Court.
The CFPB was created as part of Dodd-Frank, legislation that was signed by President Obama in 2010.
The Justice Department contends in its argument that the case raises a significant issue that the Supreme Court has not considered.
The department states that the panel ruling departs from previous separation of powers cases that have been considered by the Supreme Court.
However, in a recent court filing, PHH argued that the panel adhered to previous Supreme Court rulings, adding that CFPB Director Richard Cordray did not properly apply federal law to the case.
“The Director’s autocratic actions are exactly what one would expect from an agency that completely lacks constitutional accountability,” PHH attorneys added.
