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CFPB, Cordray Win Second Chance to Avoid a Trump Firing

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The Consumer Financial Protection Bureau and embattled director Richard Cordray won a second chance to defend his independence from the political pressure of being fired at any time for any, or no, reason by President Donald Trump.

(Related on ThinkAdvisor: Trump Must Fire CFPB’s Cordray: Republican Senators)

A U.S. appeals court in Washington on Thursday granted the CFPB’s request to reconsider an October decision that stripped Cordray of his job protection, which left him at the mercy of Trump and a pro-business Republican-led Congress looking to rescind financial regulations put in place by the Obama administration after the 2008 fiscal crisis.

(Related on ThinkAdvisor: Court Rules CFPB Is Unconstitutional, but Not Out of Business)

The do-over comes as the new president vows to repeal 75 percent of all U.S. regulations, adding to a pre-election promise to dismantle the 2010 Dodd-Frank financial reform legislation under which the CFPB was created. It also arrives amid mounting legal challenges to Cordray’s authority and that of the bureau, which was created to shield ordinary citizens from financial industry predation.

In the earlier ruling by a three-judge panel, the appeals court wiped out $109 million in penalties imposed on a New Jersey-based mortgage company that the CFPB said had violated federal real-estate transaction rules. Two of the judges then went a step further, deciding that Cordray’s solitary leadership of the agency and his insulation from being fired for anything but cause endowed him with too much power and not enough accountability.

While the panel stopped short of granting the company’s request to strike down the bureau itself, reopening the case puts that issue back in play.

A CFPB spokesman declined to comment. Ted Olson, the attorney who argued the case for the mortgage company, PHH Corp., was unavailable for comment immediately after the ruling. Helgi Walker, also a partner in the Washington office of Gibson Dunn & Crutcher LLP, didn’t immediately reply to a telephone message seeking comment.

Uncertain Future

The director’s future has been uncertain ever since Trump’s surprise win in November. Republicans have repeatedly called on the president to dismiss him and Trump could still try to find grounds to fire Cordray for cause. Lawmakers are also considering legislation that would change the CFPB’s leadership from a single director to a five-person commission or shift the bureau’s funding source from the Federal Reserve to Congress, enabling them to starve it of money.

The court will hear the re-argument on May 24, including the trio that initially heard the case in April and Chief Judge Merrick B. Garland who is again participating in cases after stepping back while his Supreme Court nomination was pending.

While the case pressed by the Mount Laurel, New Jersey-based PHH Corp. had drawn backing of the U.S. Chamber of Commerce, Competitive Enterprise Institute, National Association of Realtors and other groups prior to the initial court ruling, the outcome spurred pushback from those who support the bureau’s mission. Sixteen states’ attorneys general, all Democrats led by Connecticut’s George Jepsen, on Jan. 23 petitioned the court for permission to intervene. Three days later, the ranking Democratic Party members of the U.S. Senate Banking and House of Representatives Financial Services committees sought to do the same, giving the agency another layer of advocacy if the Trump administration abandons its defense.

Also weighing in on behalf of the CFPB are Americans for Financial Reform, the Consumer Federation of America, the U.S. Public Interest Research Group and one of the bureau’s biggest proponents, Democratic Senator Elizabeth Warren of Massachusetts.

The three-judge panel had found the CFPB was “unconstitutionally structured.” The agency had punished PHH for referring customers to insurers who then purchased reinsurance from a PHH subsidiary. CFPB determined those payments were part of an illegal kickback scheme.

The  case is PHH Corp. v. Consumer Financial Protection Bureau, 15-1177, U.S. Court of Appeals, District of Columbia Circuit (Washington).

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