Judges divided in hearing on consumer agency power

“That would seem to me to strengthen the president’s power if you only have to get rid of one person”, he said.

In a packed courtroom at the U.S. District Court of Appeals, the 11 judges peppered the attorneys for the Consumer Financial Protection Bureau and mortgage lender PHH Corporation, which is challenging the regulator, about the bureau’s powers and how it compares to other agencies.

As the agency is set up, there is a single director who serves for a five-term.

At the crux of the CFPB case is whether the director wields too much power without accountability to the president, in violation of the Constitution’s separation of powers provision. Of the 11 judges who heard Wednesday’s arguments, six were appointed by Republicans.

In an unusual turn, the Trump Justice Department is opposing the consumer watchdog agency within its own government.

“This agency goes further than anything Congress has ever attempted to do in history”, Olson told the court.

The cases are Raymond J. Lucia Companies, Inc v.

Olson also argued the leadership structure was problematic as it empowered one individual – the agency’s director – to interpret and execute the laws the agency enforces.

Several judges quickly jumped in and challenged Olson’s assertions.

Judge Patricia Millett pointed out that financial regulatory agencies like the SEC and the Federal Reserve generally have more independence compared to other federal bodies.

Mooppan, the DOJ’s attorney, also faced questions over his argument that the CFPB in essence has the same responsibilities as Cabinet agencies, whose leaders the president may fire at will.

CFPB lawyer Lawrence DeMille-Wagman rejected those complaints, saying Congress can change the law as needed. The courts have upheld the firing-only-for-cause protection for FTC commissioners, he noted.

The case hinges on whether the court should reconsider a ruling last October by a three-judge panel that found the powers of the bureau’s director Richard Cordray were unconstitutional because he can only be fired by the president for cause, and not at will.

“Whose ox is going to get gored?”

“Can you give me an example where an agency head has been successfully removed for cause?” asked Judge Janice Rogers Brown, a George W. Bush appointee.

That case and another one the Supreme Court decided in 1988 – which upheld an independent counsel statute allowing the Department of Justice to prosecute high-ranking federal officials – were cited in court as though the case against the CFPB and Cordray were open and shut. As a result, some of the judges at Wednesday’s session appeared to suggest that only the high court, not they, can rule on whether the CFPB is unconstitutional.

There’s no telling if the D.C. Circuit will rule before the end of Cordray’s term. Some Republican lawmakers have publicly urged Trump to fire him.

“The bureau’s first director, Richard Cordray, has been very fair in considering industry side of things all along”, Linda Sherry, Consumer Actions Director of National Priorities said.

Republicans on Capitol Hill have long complained about the structure of the CFPB, created as part of the Dodd-Frank laws passed in response to the financial crisis, for two reasons: Congress does not control the agency’s budget – now about $606 million – which is funded by the Federal Reserve; and the CFPB director can not be dismissed at will by the president. Wall Street interests, the banking and consumer finance industries and Republicans in Congress have fiercely opposed and criticized the agency, accusing it of overreaching in its regulation.

Some of the liberal judges on the panel said that the independent nature of the agency could help shield the regulator from political influence, a point also made by consumer groups who support the current structure.

The savings cited in the Trump budget proposal are a pittance compared with the $11.8 billion in relief that the CFPB claims has gone to nearly 30 million consumers because of its enforcement actions.

The case was brought by PHH Corporation, a mortgage company that was sued by the CFPB in 2014 with allegations of illegal kickbacks.

The White House did not explain how restructuring the CFPB would reduce the federal deficit since its budget is not appropriated by Congress.

[Copyright By Marco Green]

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