WASHINGTON, Oct. 12 (UPI) — A federal appeals court may have dealt a blow to the independence of the Consumer Financial Protection Bureau by calling its leadership structure unconstitutional on Tuesday.
A panel of judges said the independence of the CFPB departs from the regular system of checks and balances imposed on regulatory agencies, while also ordering penalties imposed on a mortgage company accused of overcharging customers be reconsidered.
The CFPB, set up as part of the Dodd-Frank financial reform law in 2010, is currently run by a director who serves a five-year term and cannot be easily fired by a president, part of the independence designers felt would help it oversee financial institutions.
Under the ruling, the White House would now be responsible for supervising the agency and removing its director if deemed necessary. Previously, the idea was for a director to outlast a president and operate relatively independently so as not to be subject to political motives.
The lawsuit considered by the court was filed by the mortgage lender PHH over a $109 million penalty it received from the CFPB, which the agency will now be required to review. The company also sought to have the agency dismantled, a goal of many Republican lawmakers and financial groups, which judges decided against.
“The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury,” the court said in the ruling.
The agency has been active recently, garnering headlines with its recent actions against Wells Fargo for creating fake accounts in customer’s names without their knowledge. The CFPB has also enacted rules restricting payday lenders, established higher standards for retirement savings brokers and has proposed rules for financial firms to prohibit customers from joining class action lawsuits.
