DOJ Reverses Position on CFPB Structure in Amicus Brief

The Justice Department argued in a brief filed Friday that President Trump can legally fire the head of the Consumer Financial Protection Bureau (CFPB) as the battle grows over the agency's future. "A removal restriction for the director of the CFPB is an unwarranted limitation on the president's executive power", the Justice Department stated in its court filing, adding that administration was not seeking to declare the entire agency and its operations unconstitutional.

The Wall Street Journal reports that Justice Department lawyers have argued that the current structure of the CFPB are problematic, as it allows the presidency to remove the director only for negligence or malfeasance. The agency was created under the Dodd-Frank Act in order to protect consumers from predatory lending or fraud. 2016), a chase challenging the constitutionality of the CFPB's single-director structure pending before the U.S. Court of Appeals for the District of Columbia Circuit. Mr. Trump's advisers haven't said what, if anything, he intends to do with the agency. The case was brought by PHH Corp., which the agency had penalized for referring customers to mortgage insurance companies in exchange for kickbacks.

The Supreme Court carved out an exception for the normal rule that all government agencies must be accountable to elected representatives with the 1935 decision Humphrey's Executor v. U.S., but since then the law has focused on ensuring such agencies have a commission structure that can reflect the makeup of Congress and the White House. A three-judge panel of the D.C. Circuit ruled previous year that the CFPB's organizational structure, with a single head instead of a commission, was unconstitutional. That's because President Trump now can't fire him without having to first show cause - a requirement the White House wants to get rid of.

"There is a greater risk that an "independent" agency headed by a single person will engage in extreme departures from the President's executive policy", the brief reads.

The next hearing is scheduled for May 24.

CFPB Director Richard Cordray's term expires in July 2018.

The agency aims to regulate the consumer-finance industry, including credit card companies, loan agencies, and other financial products and services.

  • Zachary Reyes