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Consumer Financial Protection Bureau structure ruled unconstitutional

I believe CFPB will file writ of review to USSC, who will probably grant the writ and hear the case. Consumer Protection Agency should not be controlled by the president, who controls too much already. Like the DOJ and FBI we will be converted into a banana republic dictatorship.


usatoday.com | October 12, 2016

By Kevin McCoy

A federal appeals court Tuesday declared the structure of the federal Consumer Financial Protection Bureau unconstitutional, a decision that marks a major setback for one of the signature safeguards created after the U.S. financial crisis.

The agency's leadership — a single director loosely accountable to the president and only removable for good cause — violates constitutional and historical precedents applied to federal regulators, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled.

The decision overturned a $109 million CFPB enforcement action against PHH, a mortgage lender that filed the legal challenge. The court also ruled the consumer agency made errors in a 2015 proceeding that concluded PHH illegally referred consumers to mortgage insurers in exchange for kickbacks.

However, the judges denied the mortgage firm's call to shut down the CFPB. Instead, the ruling directed an amendment of the statute that created the agency. THE CHANGE WOULD GIVE THE PRESIDENT POWER TO REMOVE THE CFPB'S LONE DIRECTOR AT WILL, AS WELL AS EXERT DIRECT SUPERVISION AND DIRECTION over a watchdog that has had unprecedented authority over home finance, student loans, credit cards and banking practices.

Enforcement actions ordered under that authority, carried out by CFPB Director Richard Cordray, have drawn praise from consumers and advocates. But congressional Republicans have criticized the regulator over what they contend was excessive power granted when the CFPB was created in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Tuesday's court ruling cited "consistent historical practice" under which independent federal agencies such as the Securities and Exchange Commission have been headed by multiple commissioners or board members that serve as internal checks on authority.

"In light of the threat to individual liberty posed by a single-Director independent agency ... we therefore hold that the CFPB is unconstitutionally structured, Judge Brett Kavanaugh wrote in the majority opinion.

The CFPB disagreed with the decision, and left open the possibility of seeking a review by the U.S. Supreme Court.

"The Bureau believes that Congress’s decision to make the Director removable only for cause is consistent with Supreme Court precedent, and the Bureau is considering options for seeking further review of the Court’s decision," the regulator said in a written statement. Noting that the court allowed the agency to continue its oversight functions, the CFPB said the other orders in the decision "will not dampen our efforts or affect our focus on the mission of the agency.”

Hailing the court decision, PHH said in a statement "we are hopeful that the Court’s opinion will provide greater certainty to the entire mortgage industry regarding the industry’s reliance on long-standing regulation as to how to conduct business."

Regarding the decision ordering the CFPB to review the enforcement action against the mortgage company, PHH said it would "continue to present the facts and evidence to demonstrate that we complied with (the Real Estate Settlement Procedures Act) and other laws applicable to our former mortgage reinsurance activities."

Download Court Decision (PDF)

Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager


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