The U.S. Consumer Financial Protection Bureau late on Friday asked the entire U.S. Court of Appeals for the District of Columbia to review an October decision that its structure is unconstitutional.
The review will involve all the court’s judges, a group generally seen as more liberal on the whole than the three-judge panel that decided that the agency vests too much power in its sole director. The panel had also said the president should be able to fire the director at will but stayed the decision pending appeal.
In its petition, the agency said last month’s ruling overrides Congress’s “explicit determination” to create an independent agency in the 2010 Dodd-Frank Wall Street reform law. Also, it said the decision could affect similar agencies with single directors who can only be removed for cause, such as the Social Security Administration.
The review’s losing side is expected to appeal to the Supreme Court. Senator Sherrod Brown, the most powerful Democrat on the Banking Committee who strongly supports the CFPB, said he expects the full court to find the CFPB’s structure sound.
The decision, in a lawsuit involving PHH Corp., reflects a larger debate about the bureau that President-elect Donald Trump could soon weigh in on. Members of Trump’s Republican party say the CFPB should be governed by a commission.
Trump could seek to withdraw the CFPB’s petition and let the October decision stand, allowing him to fire the current director, Richard Cordray.
“This is an important first step in the fight to overturn the court’s reckless, politically motivated decision that was designed to cripple the CFPB,” said Karl Frisch, executive director at Allied Progress, which has lobbied the bureau to tighten regulation of the payday lending industry.
Under Cordray, its first director, the CFPB brought a landmark case against Wells Fargo bank for creating accounts without customers’ knowledge. It has also tightened oversight of the student loan and mortgage markets, and this year has proposed rules on payday lending, mandatory arbitration clauses and debt collection.
(Reporting by Lisa Lambert; Editing by Cynthia Osterman)
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