As previously reported on this blog1, President Trump's issuance of an Executive Order and the subsequent introduction of bills seeking to eliminate the Consumer Financial Protection Bureau ("CFPB" or "Bureau") signaled a dramatic shift from the Obama Administration's support of the CFPB, which was expected to continue under Clinton.
Further evidence of this new administration's shift came on March 3, when the Trump Administration asked for permission to file an amicus brief in the case pending before the D.C. Circuit, which may have a significant impact on the current structure of the CFPB. It will also decide whether Director Richard Cordray will remain at the helm through the remainder of his term, which is set to expire in July 2018. The case, PHH Corporation, et al v. CFPB, involves a mortgage servicer, PHH Corporation, and seeks to overturn a $109 million judgment entered against it by the CFPB.2 Notably, this increased judgment was imposed by CFPB Director Cordray on appeal, upon review of an administrative law judge's smaller penalty. In October 2016, a divided D.C. Circuit panel ruled in favor of PHH Corporation and gave the president authority to terminate the CFPB director at will, rather than for cause, as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The D.C. Circuit subsequently granted the CFPB's petition for hearing en banc and vacated the panel's decision. While the Obama Administration supported the CFPB's petition for rehearing, many questioned whether the amicus brief filed by the Department of Justice under the Trump Administration would change course and question the CFPB's current structure.
The brief, which was filed on March 17, 2017, states that review by the full D.C. Circuit is warranted because of the panel's flawed analysis of the constitutionality of the CFPB's current structure. The brief argues that the structure of the CFPB violates the U.S. Constitution's separation of powers, not because of its impact on individual liberty, as stated by the panel, but rather because it impedes the president's executive power. The Department of Justice did, however, agree with the panel's conclusion that the remedy for the constitutional violation was to sever the provision limiting the president's authority to remove the CFPB Director, rather than declare the Bureau unconstitutional. The en banc hearing is scheduled for May 24, 2017.
While the Trump Administration's amicus brief, which questions the constitutionality of the current structure, demonstrates a shift from the prior administration's support for the Bureau, the CFPB has the support of many state attorneys general. On January 23, 2017, 16 state attorneys general filed a motion to intervene in the Bureau's petition for rehearing en banc. While the motion to intervene was denied, foreclosing the opportunity for the attorneys general to appeal an adverse decision by the D.C. Circuit, the attorneys general may, nonetheless, have powerful enforcement tools at their disposal. Under Dodd-Frank, state attorneys general have authority to bring civil actions to enforce Dodd-Frank's regulations against entities within their jurisdiction.3 While timely notice to the Bureau is required prior to filing a civil action to provide the Bureau with the opportunity to intervene in the action, the Act does not appear to permit the Bureau to veto an action brought by a state attorney general thereby creating a potential "work around" in the event of a scaled-back CFPB under the Trump Administration.4
2 Case No. 15-1177 (D.C. Cir. 2016).
3 12 U.S.C. § 5552.
4 Melanie Brody, Stephanie C. Robinson, and Francis L. Doorley, "Consumer Financial Services Cos., Prepare for a New Dynamic," Law360.com Mar. 6, 2017). Avail. at: https://www.law360.com/articles/892620/consumer-financial-services-cos-prepare-for-new-dynamic
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