Trump Administration Claims Power to Remove CFPB Director

By Chris Bruce

The Trump administration March 17 asked one of the nation’s most powerful courts to uphold an October court ruling that said the Consumer Financial Protection Bureau’s leadership structure violates the Constitution ( PHH Corp. v. Cons. Fin. Protection Bureau , D.C. Cir. 15-cv-01177, brief filed 3/17/17 ).

“In sum, a removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power,” said the U.S. government’s friend of the court brief filed in the U.S. Court of Appeals for the District of Columbia Circuit. “This Court should not extend the exception established by the Supreme Court in Humphrey’s Executor to undermine the general constitutional rule that the President may remove principal officers at will,” it said, referring to a 1935 U.S. Supreme Court ruling that carved out an exception to the president’s general removal powers.

Among other points, the government’s brief also endorsed the remedy selected by the October panel’s two judges. While considering a holding that might have found the agency broadly unconstitutional, the panel simply struck the statutory language that limits the president’s removal authority, leaving the CFPB to continue its operations. Severing the removal restriction, the March 17 brief said, “is the proper remedy.”

The government’s stance came as no surprise to many watching the case. Even so, it puts the new administration in open opposition to the CFPB, which enjoyed robust support from the Obama administration.

It also underscores the possibility that President Trump might dismiss CFPB Director Richard Cordray. “This administration wants to give the president the power to remove the Director, which the president would likely act on immediately,” said Ari Karen, a partner in the Bethesda, Md., offices of Offit Kurman.

Removal Limits Faulted

In the October decision, two judges on a three-judge panel found unconstitutional Dodd-Frank Act provisions that limit the president’s power to remove the CFPB director. The full D.C. Circuit is now reviewing that decision.

A CFPB spokesman declined to comment on the brief. The agency is scheduled to file a response March 31. That’s also the deadline for friend-of-the-court briefing by CFPB supporters.

The case, which is considered an important test of the constitution’s separation of powers, arose from a 2015 enforcement order against PHH Corp., a New Jersey mortgage company.

Should the CFPB lose it may seek Supreme Court review, but only if the U.S. Solicitor General either agrees with the request or chooses not to oppose it. That could put the Justice Department in the driver’s seat, according to Joseph T. Lynyak III, a partner in the Los Angeles and Washington offices of Dorsey & Whitney.

“Once the en banc opinion is issued, an appeal to the Supreme Court will be under the control of the Department of Justice, not the CFPB,” he told Bloomberg BNA. “My guess is that the Solicitor General will give the views of the government, which have now changed.”

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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