Courts, Lawmakers Continue Tussle Over CFPB’s Future

Aug 11, 2017 | News

On the heels of publishing a new rule on mandatory arbitration, the Consumer Financial Protection Bureau (CFPB) is caught in a struggle for its future in multiple federal courts and Congress. As courts diverge and lawmakers clash over healthcare, the budget, Russia, and tax reform, the fate of the CFPB may ultimately rest with the highest powers in the federal government.


Late last year the D.C. circuit court found the single, independent director structure of the CFPB  to be the “headless fourth branch of the U.S. government” and unconstitutional. Only a few months later, the court agreed to rehear the case, PHH Corp. v. CFPB, en banc. Oral arguments took place in May, but the D.C. circuit has yet to issue its ruling or provide a timetable for its release.


The PHH case was unique in that the U.S. Dept. of Justice (DOJ) flipped allegiances between the original ruling last October and the rehearing earlier this summer. With the Trump administration’s backing, other companies battling the CFPB are also choosing to challenge the agency’s constitutionality. Ocwen Financial recently received permission to allow the DOJ to brief a Florida judge on the issue. In Pennsylvania, a federal judge ruled this week that the CFPB’s structure does not violate the U.S. Constitution. As federal judges split on the constitutionality issue, it looks more and more like the Supreme Court may need to intervene.


In Congress, lawmakers are pushing to increase accountability to the agency. A recent budget proposal in the House includes a provision that would bring the CFPB under Congressional appropriations, decoupling the Bureau from the Federal Reserve’s coffers. Another bill seeks to bestow an independent inspector general on the CFPB, although the inspector general the agency shares with the Federal Reserve is not afraid to criticize the Bureau.


Congressional Democrats have shown unadulterated support for the beleaguered consumer protection agency. A report by House Democrat staff last month detailed the abusive treatment received by the CFPB under Republican leadership. The repeated offenses by Wells Fargo have only emboldened Democrats in Congress to defend the agency. Just this week, Senator Elizabeth Warren, the force behind the creation of the CFPB, put bank executives on notice for their lack of reaction to the Bureau’s new arbitration rule.


Across the aisle, Republicans are pressing for contempt charges against the CFPB’s director, Richard Cordray for failing to produce documents related to his agency’s handling of the scandal at Wells Fargo. Congressional Republicans are debating a bill that would nullify the CFPB rule on arbitration via the Congressional Review Act. The outcome of that review could also influence future agency activity at the CFPB as well.

Rumors are swirling that Cordray may leave his post at the CFPB soon to run for governor of Ohio. His departure would leave President Trump with the chance to nominate a director more willing to work with other federal officials and halt the implementation of damaging rules and enforcement efforts. With the governor’s race heating up in Ohio, Cordray will need to make a decision soon on whether he will join the campaign trail. With his potential departure, a full schedule in Congress, and a crowded docket debating the CFPB’s constitutionality, the agency could look very different in the coming weeks.

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