Justice Department Fires Salvo at Consumer Watchdog – By  Brent Kendall Updated March 17, 2017 7:10 p.m. ET


POTUS’ administration backs legal effort to have structure of Consumer Financial Protection Bureau declared unconstitutional

The Justice Department, above, says the CFPB’s structure creates separation-of-powers problems under the Constitution because the bureau director isn’t sufficiently answerable to the president.

The Justice Department, above, says the CFPB’s structure creates separation-of-powers problems under the Constitution because the bureau director isn’t sufficiently answerable to the president. Photo: Andrew Harnik/Associated Press

WASHINGTON—The Trump administration took aim at a consumer finance regulator created after the 2008 financial crisis, backing a legal effort to have the structure of the Obama-era agency declared unconstitutional.

The Justice Department, now under Trump administration leadership, filed court papers on Friday opposing the Consumer Financial Protection Bureau, an independent regulator, asking a federal appeals court to order the restructuring of the agency.

The CFPB is fighting to keep its current setup, which gives its director protection from political interference from the White House. The administration in February said that President Donald Trump believes the bureau as currently organized is unaccountable to the public.

The dispute stems from a case in which the CFPB alleged PHH Corp., a New Jersey mortgage lender, violated the Real Estate Settlement Procedures Act by accepting kickbacks from mortgage insurers.

The Democratic-controlled Congress that created the CFPB after the 2008 financial crisis gave the agency power over the markets for consumer-finance products and an unusual amount of independence. It is headed by a single director who can be removed by the president only for cause, such as negligence or malfeasance.

The six-year-old bureau has been criticized by Republicans since its inception for what they see as heavy-handed and unnecessary regulation of firms that sell loans, credit cards and other financial products.

CFPB Director Richard Cordray has defended the bureau’s independent structure and mandate as an enforcement agency, saying it has helped consumers across the country.

The Justice Department said the CFPB’s structure creates separation-of-powers problems under the Constitution because the bureau director isn’t sufficiently answerable to the president.

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