Appeals court makes key move in CFPB constitutionality case | American Banker

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A federal appeals court agreed Thursday to hear an appeal by the Consumer Financial Protection Bureau challenging a ruling last year that its single-director structure is unconstitutional, a victory for the embattled agency.

The U.S. Court of Appeals for the D.C. Circuit said it agreed to consider the CFPB’s petition on an “en banc” basis and scheduled a hearing for May 24. The case will be heard by 10 judges, with Chief Judge Merrick Garland, a former nominee for the Supreme Court, not participating in the en banc review.

The move follows a decision by a three-judge panel of the appeals court last year that determined the CFPB’s structure was unconstitutional. The court struck down a part of the Dodd-Frank Act that the director of the CFPB could only be removed by the president “for cause,” essentially allowing the president to fire the head of the agency at will. The decision was stayed pending appeal for a review by all 10 judges.

The court could determine the fate of Consumer Financial Protection Bureau Richard Cordray. Bloomberg News

The court asked three questions about the case, PHH Corp. v. CFPB:

  • Is the single director structure consistent with the Constitution and, if not, what is the way to solve that problem?
  • Can the court decide the case without weighing on the question of constitutionality?
  • What happens if the court decides that the administrative law judge who initially decided the case is an “inferior officer” under the law rather than an “employee” of the CFPB?

The case is being closely watched because it could determine the fate of CFPB Director Richard Cordray. Although his term does not expire until July 2018, if the decision stands, President Trump could fire him at will. Republicans have been urging Trump to fire Cordray “for cause” even without a ruling.

Kate Berry

Kate Berry

Kate Berry covers the Consumer Financial Protection Bureau for American Banker.

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