Courts Take Away President’s Power To Fire CFPB Without Just Cause

The Consumer Financial Protection Bureau (CFPB) scored a victory Wednesday (Jan. 31) when a U.S. appeals court ruled the President can only remove the head of the watchdog agency with a specific cause, such as a dereliction of duty or engaging in wrongdoing.

According to a report in Bloomberg, the Washington, D.C.-based U.S. appeals court ruled that Congress created the CFPB in its form to protect against changes in the political climate. It also noted that if the President was given more room to fire the director, it “would put the historically established independence of financial regulators and numerous other independent agencies at risk,” as U.S. Circuit Judge Nina Pillard wrote in the seven to three ruling.

“Congress’s decision to provide the CFPB director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will,” Pillard added. “We have no warrant here to invalidate such a time-tested course.”

The decision will likely face appeal in the U.S. Supreme Court by the White House and from PHH Corp., the New Jersey mortgage company that has been embroiled in a legal battle with the CFPB since 2015. The latter wants the government watchdog dismantled after it levied a $109 million fine in response to PHH’s alleged violation of federal real estate rules.

The fines were tossed out by a three-judge panel in October of 2016, with the judges ruling the President has the right to fire the director of the CFPB for any reason he or she sees. That resulted in a CFPB appeal in front of the full court.

Among the three judges that sided with the White House and PHH, Circuit Judge Brett Kavanaugh argued that the ability to fire without will would mean the President “may be stuck for years with a CFPB director who was appointed by the prior President and who vehemently opposes the current President’s agenda.”

To fix that, Kavanaugh said the CFPB should be left alone, though the President should have the power to fire the director at any time.