The D.C. Court of Appeals granted the Consumer Financial Protection Bureau’s (CFPB) petition for a rehearing of the case of PHH Corp. v. CFPB on Feb. 16.
The court has ordered that the judgment filed Oct. 11, 2016 be vacated and the case and oral arguments be reheard by the court sitting en banc on May 24. In addition to filing briefs electronically, the court further ordered both parties to “file 30 paper copies of each of their final briefs and the deferred appendix” by March 10.
With the petition for appeal granted, President Donald Trump can remove CFPB Director Richard Cordray only for cause.
“The president believes that the initial decision made by the three judge panel of the D.C. circuit was correct,” a White House spokesperson said in an emailed statement to the Wall Street Journal. “The structure of the CFPB makes it unaccountable to the American people.”
If Trump does not have a strong enough case to do so, he could try to exercise his authority under the Take Care Clause that allows him to ignore any statute he deems unconstitutional – which in this case would be the section of the Dodd-Frank Act which limits Cordray’s removal – and fire Cordray without cause, as has been suggested by Republicans, such as Rep. Jeb Hensarling (R-Texas).
“The CFPB is a rogue agency,” Hensarling told CNBC, when asked about Sen. Ted Cruz’s (R-Texas) plan to abolish the bureau. “The second highest court in the land has ruled it unconstitutional. We would be derelict in our duty if we didn’t do something about it. Senator Cruz’s plan is certainly a valid plan, and that is to simply get rid of it and start over. One of the options we can look at is rolling our federal consumer protection enforcement into the Federal Trade Commission. There’s a good argument it belongs there.”
Hensarling also pointed out that there are arguments that federal consumer protection should be handled by bank regulators such as the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation or the Federal Reserve.
“I’m not offended by having consumer financial protection in one agency but not an agency that is unaccountable to the president, unaccountable to Congress, unaccountable to the courts, unaccountable to the American people,” he said. “We have set up, basically, a dictator. He’s a benevolent dictator but no one person in America, particularly an unelected person, should have the power, unilaterally, to decide what kinds of credit cards go in our wallets, whether or not we can have a mortgage or whether or not we like our bank or if we can keep [it]. This agency is just out of control.”
Hensarling said that since the bureau’s formation, free checking at banks has been cut in half, bank fees have risen, auto loans have become less accessible and credit cards are less accessible, among other things.
The path to eliminating the CFPB or firing Cordray without a court ruling is not all that simple, however, because the president cannot overrule a court order, as is explained in the 2013 D.C. Circuit Court case of In re. Aiken County, et al., Petitioners.
“If the president has a constitutional objection to a statutory mandate or prohibition, the president may decline to follow the law unless and until a final court order dictates otherwise,” the circuit court stated. “But the president may not decline to follow a statutory mandate or prohibition simply because of policy objections. Of course, if Congress appropriates no money for a statutorily mandated program, the executive obviously cannot move forward. But absent a lack of funds or a claim of unconstitutionality that has not been rejected by final court order, the executive must abide by statutory mandates and prohibitions.”
With that being the case, it seems the president has no other recourse, if he wishes to fire Cordray, than to await a final ruling by the D.C. Court of Appeals.
In addition, by vacating the appellate ruling from October, the CFPB’s status as an independent agency remains in place. Because of the October decision, there was some question over whether the CFPB was an independent agency, or an executive agency, as the appellate court’s ruling changed its statute to be constitutionally structured.
Because the CFPB is an independent agency, it does not have to comply with the president’s recent executive orders concerning a regulatory freeze and the elimination of a regulation for every new rule promulgated.