Transition Tracker | CFPB Appeals in PHH Case

CFPB WATCH  


WHAT HAPPENED: On Nov. 18, the CFPB appealed the D.C. Circuit Court's three-judge panel ruling in the PHH Corp. v. Consumer Financial Protection Bureau case that found the CFPB’s structure unconstitutional. Specifically, the panel ruled that the president has the power to remove the CFPB director at will. The ruling overturns the Dodd-Frank Act’s provision that the director be removed only “for cause.” Despite the fact that the CFPB has appealed, the finding of the court that the CFPB’s structure is unconstitutional remains in force until the full circuit court or the U.S. Supreme Court decide otherwise. It seems likely that the full court will decide to review the case, given its high profile. A decision from the court on whether or not it will review the panel’s decision is expected by the end of the year. After deciding to review the decision, the judges could ask for a new round of briefing, or go ahead and just set a date, probably in the spring, for oral argument. The court may also decide to forgo both. A decision by the full court would probably not come until the summer. The circuit court’s decision could be appealed by either party to the Supreme Court.  

WHAT IT MEANS: Where does this leave CFPB Director Richard Cordray? Although the PHH case sets some precedent, President-elect Donald Trump can make his own decision regarding Director Cordray, relying on PHH or not. For example, Trump could look for cause to remove Cordray from office. Alternatively, Trump could ask his new staff at the Department of Justice for a legal opinion on his authority to remove Cordray from office. The legal opinion could argue that the “for cause” language is unconstitutional and the president has the authority to remove Cordray from office. The legal opinion could cite the PHH ruling to bolster its position or it could not. Cordray could then resign or he could file suit in federal court to keep his position. Political considerations, as well as legal, would come into play.