A federal appeals court's ruling on Tuesday that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional has been decried as a "reckless and partisan" attack on the independent watchdog agency.
The decision (pdf) from a three-judge panel said the CFPB is "unconstitutionally structured," as it is run by a single director who "enjoys more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president."
Daniel Marans reported for the Huffington Post that "[r]ather than disband the CFPB entirely," the U.S. Court of Appeals for the D.C. Circuit "ruled that the agency will now function under direct oversight of the president, who will have the power to fire the agency's director at will."
He added: "The decision, if it stands, would likely weaken the CFPB's effectiveness by subjecting it to the political whims of a less hospitable White House some time in the future."
In fact, Gillian B. White explained Tuesday at The Atlantic, Elizabeth Warren's CFPB was set up as it was—similarly to the Federal Reserve—on purpose: "The Fed's goals and purpose—to establish maximum employment and stable prices—are set by Congress, but its funding and operation remain autonomous in order to prevent being swayed by political pressure," she wrote.
"The thinking behind the CFPB's structure was similar," White continued. "The Bureau receives its money not through congressional appropriation but from the Fed. And in its inception, the agency was given a long, independent leash purposely so that it could proceed with its work without worrying too much about political retribution."
Now, she concluded, "a new level of oversight could substantially alter the agency's ability to tackle issues of consumer finance as it sees fit."
Sure enough, as the Associated Press reported:
The ruling handed a victory to the banking industry, which has viewed the agency as a thorn in its side and accused it of overreaching in its regulation of consumer financial activities. The agency has taken legal action against banks, mortgage companies, credit card issuers, payday lenders, debt collectors, and others. The CFPB says that over five years it has recovered $11.7 billion that it returned to more than 27 million harmed consumers.
(In particular, the ruling was a triumph for mortgage services firm PHH Corp., which brought the case against the CFPB after being fined $109 million for an alleged illegal kickback scheme. That fine was vacated as part of Tuesday's decision.)
Perhaps, said Liz Ryan Murray, policy director for People's Action Institute, "the CFPB is fulfilling their chartered mandate just a little too well for predatory lenders, shady bankers, and abusive debt collectors."
Added Karl Frisch, executive director for the consumer advocacy group Allied Progress: "It's no wonder Wall Street wants to kill this successful agency—their ability to rip off consumers has been greatly diminished."
Allied Progress zeroed in on one member of the panel, Judge Brett Kavanaugh, who they described as "a partisan activist with deep ties to corporate America."
"Judge Kavanaugh's reckless, partisan decision was written to appease his cronies on Wall Street and the right-wing political movement where he got his start," said Frisch. "We have no doubt that it will be reversed by a full panel of his colleagues on the D.C. Circuit."
If that doesn't happen, warned Public Citizen executive director Robert Weissman, "the decision will make it incumbent on future presidents to shield the agency from improper political interference and to encourage it to maintain its aggressive posture."
"The CFPB has a track record of putting out strong new rules efficiently and taking effective enforcement actions against companies, including top executives," Weissman said. "While ideological and industry opponents of the CFPB may claim vindication, nothing in the decision undermines the legitimacy and credibility of the CFPB's important work on behalf of consumers."