Corporate Accountability

Top Dem Lawmakers Seek To Back CFPB In Leadership Case

By Evan Weinberger

Two top Democratic lawmakers on Thursday asked to intervene in litigation challenging the constitutionality of the Consumer Financial Protection Bureau’s structure, arguing that the Trump administration was unlikely to provide the vigorous defense that the bureau deserves.

Rep. Maxine Waters of California, the ranking Democrat on the House Financial Services Committee, and Sen. Sherrod Brown of Ohio, the ranking Democrat on the Senate Banking Committee, said in a filing in the D.C. Circuit that rumors that the Trump administration was preparing to fire CFPB Director Richard Cordray and a belief that the Trump administration would not allow the bureau to take its case to the U.S. Supreme Court meant that the bureau needed the support of Congress in the high-stakes litigation.

“In sum, the evidence that has steadily accumulated since the election has now made it apparent that movants cannot count on the new administration to represent their interests in this litigation,” the two lawmakers said in their petition to the D.C. Circuit.

The move from Waters and Brown comes just days after 17 Democratic state attorneys general filed their own petition before the D.C. Circuit to intervene on behalf of the CFPB.

At issue in the current case is an October ruling from a divided D.C. Circuit panel that ruled that the CFPB’s single-director structure was a violation of the Constitution’s separation of powers clause. The remedy imposed by the D.C. Circuit was to make the CFPB, which was created as an independent agency by the 2010 Dodd-Frank Act, an executive agency.

The ruling also invalidated a $109 million judgment the CFPB issued against PHH Corp., a mortgage servicer.

At a fundamental level, the decision on the CFPB’s constitutionality meant that the president had the authority to fire the CFPB’s director at will rather than the existing for-cause standard. That opinion has been stayed pending the CFPB’s request for an en banc review of the October ruling.

The Obama administration had supported the CFPB’s request for an en banc review of the decision, and the Democratic state attorneys general had thought that the CFPB would have the backing of an administration led by Hillary Clinton, the Democratic nominee for president, they said.

But Trump’s November victory changed the calculus in the case. While Trump’s Justice Department hasn’t said one way or another how it will handle the CFPB litigation, there is a widespread belief that the new president will either not back the bureau in its case, making it impossible to file a petition for a writ of certiorari to the Supreme Court if necessary, or it will fire Cordray and replace him with a new director that will elect to go along with the original D.C. Circuit ruling, according to Brown and Waters.

Such a move would harm the interests of members of Congress who voted to create the CFPB in the independent structure it now has, Brown and Waters said.

“Only through intervention can movants ensure that there will be a zealous defense of the constitutionality of the law they worked to pass and for which they voted,” the two lawmakers wrote in their brief.

According to the brief, PHH is expected to oppose the two lawmakers’ motion to intervene while the CFPB has not expressed a view one way or another.

Also Thursday, six liberal activist groups filed their own motion to intervene in the case, arguing that their interests in maintaining a strong CFPB means they should be allowed to step in to help defend the bureau.

“We are committed to protecting the CFPB’s independence, which is essential to stopping Wall Street and predatory lenders from fleecing American consumers. Director Cordray has been an effective and tireless leader of the CFPB and should serve his full five-year term without the threat of removal by Trump at the behest of industry lobbyists,” Lisa Donner, the executive director of Americans for Financial Reform, said in a statement.

AFR was joined by the Center for Responsible Lending and the Self-Help Credit Union, which is affiliated with the group; the Leadership Conference on Civil and Human Rights; the U.S. Public Interest Research Group; and Maeve Brown, the chair of the CFPB’s Consumer Advisory Board.

Waters and Brown are represented by Elizabeth B. Wydra, Brianne J. Gorod, Brian R. Frazelle and Simon Lazarus of the Constitutional Accountability Center.

The activist groups are represented by Thomas C. Goldstein, Eric Citron and Tejinder Singh of Goldstein & Russell PC.

PHH is represented by Theodore B. Olson, Helgi C. Walker and Scott P. Martin of Gibson Dunn, Mitchel H. Kider, David M. Souders, Sandra B. Vipond and Michael S. Trabon of Weiner Brodsky Kider PC, and Thomas M. Hefferon and William M. Jay of Goodwin Procter LLP.

The CFPB is represented by Lawrence DeMille-Wagman.

The case is PHH Corp. et al. v. Consumer Financial Protection Bureau, case number 15-1177, in the U.S. Court of Appeals for the District of Columbia Circuit.