Top Democrats, Advocacy Groups Join Defense of CFPB in DC Circuit

By C. Ryan Barber

Citing the Trump administration’s threat to the Consumer Financial Protection Bureau, a coalition of consumer advocacy groups and the top Democrats on the U.S. Senate and House banking committees on Thursday moved to defend the agency and its leadership.

U.S. Sen. Sherrod Brown of Ohio and Rep. Maxine Waters of California, moving to intervene in a case in the U.S. Court of Appeals for the D.C. Circuit, said the Trump administration cannot be counted on to defend the independence of the agency’s single-director structure.

A divided panel on the D.C. Circuit in October struck down the structure of the CFPB, an agency created in the aftermath of the financial crisis. The appeals court said in the case, PHH v. CFPB, that the president should be empowered to remove the CFPB’s leader at will, rather than only for cause.

The agency, which has represented itself in the federal appeals court, has asked the full D.C. Circuit to review the panel decision. But the CFPB is required to consult the U.S. Department of Justice before going to the U.S. Supreme Court, raising concerns that the Trump administration could shut down the agency’s defense if the full D.C. Circuit declines to hear the case. The move to intervene by Brown and Waters would allow them to take the defense of the CFPB’s structure to the high court.

PHH Corp.’s lawyers, including Gibson, Dunn & Crutcher partners Theodore Olson and Helgi Walker, plan to oppose the intervention request from Brown, Waters and the consumer advocates. A White House representative was not immediately reached for comment.

PHH, a mortgage lender, is challenging a $109 million fine for orchestrating an alleged kickback scheme. The CFPB said PHH received money in exchange for referring consumers to mortgage insurers. The D.C. Circuit’s panel ruling in October wiped out that fine.

Brown and Waters, in their motion to intervene, said Trump’s appointment of critics of financial regulation to his transition team portends a threat to the CFPB. Trump also signaled during the transition that he might fire the CFPB director, Richard Cordray, whose five-year term is set to expire in July 2018.

Those steps conflicted with Trump’s rhetoric during the campaign, in which he “often spoke in populist terms about the need to protect American workers and consumers—exactly what the CFPB has been doing under the leadership of its current director,” Brown and Waters said in their brief, filed by the Constitutional Accountability Center.

“In short, it is possible that the new administration could prevent review of the panel decision in this case—either by attempting to fire the CFPB’s current director, or by prohibiting the bureau from seeking Supreme Court review should this Court decline to grant the pending [appeal],” argued Brown and Waters’ lawyers at the CAC.

A coalition of consumer advocacy groups, including Americans for Financial Reform and the Center for Responsible Lending, also moved to intervene Thursday, just days after more than a dozen state attorneys general took a similar step.

“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,” said Lisa Donner, executive director of the AFR, in a statement.

Many financial companies have pointed to the PHH decision in their push to escape a CFPB investigation or defeat a lawsuit from the agency. In at least one case, a federal judge agreed that the CFPB’s structure was unlawful but declined to dismiss the charges.