by Jason Oliva
Never a stranger to controversy, the Consumer Financial Protection Bureau has been making headlines lately, perhaps less for its enforcement actions and rule-makings, and more for debates regarding its constitutionality.
As high profile court proceedings continue to unfold in the nation’s capital, there is a chance that changes may finally arrive to the CFPB’s structure and authority, suggests one recent editorial from The Wall Street Journal.
“In its short, unhappy life, the Consumer Financial Protection Bureau has compiled a record of abuse rivaling that of Washington’s most entrenched bureaucracies,” WSJ writes. “But there’s new reason to hope that this misanthropic creation of Dodd-Frank may not reach adulthood.”
The editorial points to the ongoing litigation between the CFPB and PHH Corporation (NYSE: PHH), a Mount Laurel, N.J.-based mortgage services provider, who the CFPB alleges broke the law when it referred customers to mortgage insurers that brought reinsurance from PHH.
The WSJ notes that the “unaccountable” CFPB overturned longstanding interpretations of law and specific guidance from the Department of Housing and Urban Development in its claims against PHH.
PHH is currently challenging the CFPB’s $109 million fine levied against it—roughly 18 times the amount determined by the Bureau’s own administrative-law judge.
For this “egregious” behavior, the Washington, D.C. Circuit Court of Appeals, as well as the WSJ, are wondering whether any of the CFPB’s actions are constitutional. More specifically, does this rogue agency have the authority to conduct such raids on American businesses?
“Judges on the D.C. Circuit asked because the consumer bureau is truly something new in Washington: a powerful independent regulatory agency run by a single federal official who cannot be removed from office at the will of the President,” WSJ writes.”The President can only fire the bureau’s director for cause.”
However, the editorial notes that the Constitution’s Article II gives the President authority to run the executive branch, and that includes the ability to fire top officers.
The CFPB’s single-director structure, along with the fact that the Bureau is not subject to Congressional appropriations, like other federal agencies, has long been a source of contention amongst agency opposition.
But while other federal agencies, such as the Social Security Administration, are also run by “one man exercising so much power,” according to the WSJ, the SSA “cannot tell business how to generate the cash to fund payroll taxes or tell beneficiaries how to spend them.”
“The consumer bureau, on the other hand, roams the financial landscape enforcing 18 statutes and bringing actions that can cost hundreds of millions of dollars,” WSJ writes. “It writes rules governing a wide swath of American business, has the power to define what is ‘unfair’ or ‘abusive’ in financial services, investigates companies and imposes penalties.”
Article II of the Constitution gives the President “not some of the executive power, but all of it,” noted Judge Brett Kavanaugh, one of the judges who is hearing the case between CFPB and PHH.
“For the sake of liberty and the integrity of the separation of powers, they should strike down this offense to constitutional governance,” WSJ writes