A federal appeals court ruled on 11 October that the structure of the US agency charged with guarding consumers’ finances is unconstitutional, fueling an election-year political fight over one of the signature responses to the 2007-09 financial crisis. The US Court of Appeals for the District of Columbia Circuit threw out a $109 million penalty against PHH Corp in 2014, saying that the structure of the Consumer Financial Protection Bureau (CFPB) gives its sole director too much power.
The three-judge panel, though, sought to remedy the problem by giving the president the power to fire the director, which it said made the position similar to other constitutionally sanctioned agency heads.
“The CFPB has dodged the biggest bullet, which is to be declared unconstitutional," said Andrew Sandler, chairman of BuckleySandler law firm. The CFPB is expected to request the entire appeals court conduct an “en banc" review of the case.
The losing side will likely appeal to the Supreme Court.
The ruling will affect other lawsuits against the agency in lower courts, but should not affect the government’s $190 million settlement last month of fraud charges with Wells Fargo & Co. The CFPB was involved in that case.
Circuit Judge Brett Kavanaugh wrote the current CFPB structure “poses a far greater risk of arbitrary decisionmaking and abuse of power and a far greater threat to individual liberty, than does a multi-member independent agency."