Circuit Court weighs in on the CFPB’s Constitutionality

Our government officials are charged with upholding and protecting the constitution of the United States of America. Being made up of people (some of them questionable, at best) there are going to be times when the government makes mistakes; sometimes they even take our tax money to implement something that is clearly unconstitutional. When those things happen – and they happen more often than you might want to know – the matter must be brought before the courts.

This is what is happening right now, as the District of Columbia U.S. Circuit Court of Appeals is hearing arguments about whether or not the Consumer Financial Protection Bureau is unconstitutional. The Consumer Financial Protection Bureau (CFPB) is the culmination of the Dodd Frank Wall Street Reform Act of 2010. Based upon information from a new order that was issued by Republican appointees, the CFPB’s attorney, Lawrence DeMille-Wagman better do all that he can to prepare to defend the legitimacy of the organization that he represents.

Just how effective the CFPB has been of late was recorded in the biyearly report that the CFPB’s Director Richard Cordray recently released to the Senate. The effectiveness of the organization, however, seems to be on par with just how much some conservatives seem to passionately loathe this organization. Lobbyists for businesses in America would love to have an opportunity to take power away from the CFPB. The bureau, for its part, is currently on a hot streak; pursuing new initiatives to restrict mandatory arbitration clauses and cooking up new regulations to slap on the payday lending industry.

The chance for opponents of the CFPB to do what they need to do comes by way of an appeal that was made by a mortgage lending company called PHH Corporation. The appeal was related to a jaw-dropping $109 million decision that Cordray himself handed down to the company back in the summer of 2015. There was a judge who oversaw the CFPB’s case against PHH Corp, and that judge recommended a $6 million settlement. Cordray, however, didn’t think that was sufficient, arguing that the company was engaged in maneuvers that earned them serious kickback money in the form of reinsurance purchases.

The lawyers for PHH immediately voiced their concerns, which ranged from the bureau’s interpretation of due process to other arguments. The attorneys also requested a stay of the CFPB’s decision in order to prevent the company from having to pony up a cool $109 million while working its way through a complex appeal in the courts.

This team of lawyers have asserted that the CFPB violates Article 2 of the Constitution, as its director (Cordray) does not have to answer directly to the president or to Congress, even though the bureau is funded via the Federal Reserve. The precedent for this argument can be found in the ruling from U.S. Supreme Court case of Free Enterprise Fund v. Public Company Accounting Oversight Board. This ruling winded up with the accounting board being found to be unconstitutional because the president was not able to make direction actions to remove members for good cause.

The CFPB has been facing opposition from all sides these days, with even key Democrat leaders taking aim at the organization. Depending upon how this case progresses, Cordray and his direct reports may very well find themselves on the chopping block sooner rather than later. That, of course, would be music to the ears of plenty of conservative leaders, business lobbyists and business owners who have had it in for the Consumer Financial Protection Bureau for some time now.

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