Lawyers for the U.S. Department of Justice (DOJ) filed an amicus brief opposing a decision by the Consumer Financial Protection Bureau (CFPB), switching sides in a lawsuit over the constitutionality of the structure of the independent government agency.
In October 2016, three judges on the U.S. Court of Appeals for the DC Circuit ruled in favor of a mortgage lending company that alleged Congress improperly designed CFPB. According to the court’s ruling, CFPB is not in compliance with constitutional requirements governing executive government agencies’ accountability to the president. The court also determined the agency has allotted too much power to its director, Richard Cordray.
CFPB is an independent government agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd-Frank. CFPB was created to enforce restrictions on financial activity.
CFPB lawyers appealed the DC appellate court’s decision in November, and the case is now being considered again by the full 11-judge panel.
In March, DOJ lawyers filed paperwork siding with the plaintiff and against CFPB, stating the government’s new position is CFPB has acted unconstitutionally to prevent executive oversight.
Who Works for Whom?
Peter Wallison, the American Enterprise Institute’s Arthur F. Burns Fellow in Financial Policy Studies, says the case is about whether Cordray works for himself or for the president.
“The initial panel that heard the case several months ago and decided the case was a three judge panel, they decided in a 2–1 decision that the CFPB had been unconstitutionally established because the president cannot remove the director of the CFPB at will. Most of the people who serve the president are removable at will.
“In the case of the CFPB, that is not true,” Wallison said. “There, the person that occupies the office of director can only be fired for misconduct of some kind. Under those standards, the president cannot get the director of the CFPB to behave the way the president wants him to behave.”
Courtroom Civil War
Brian Knight, a senior research fellow for the Financial Markets Working Group at George Mason University’s Mercatus Center, says government agencies rarely fight against each other in the courtroom.
“On one hand, it is not too surprising that the DOJ changed its position with the new administration,” Knight said. “It is a rare thing when the DOJ actually opposes another government agency. It isn’t entirely unheard of, but it is very rare.”
Bringing CFPB to Heel
Knight says DOJ’s changed stance indicates the Trump administration sees CFPB as a rogue agency.
“This does indicate that the Trump administration is not currently happy with the CFPB, as it currently is, and they want more control over it,” Knight said.