Consumer bureau faces uncertain future

The future of the Consumer Financial Protection Bureau is up in the air, as a court challenge and incoming administration could completely upend the 5-year-old agency.

With all of Washington in a state of upheaval, the uncertainty is perhaps no greater than at the CFPB, where it is unclear who will be running the agency in the months to come, or even what the overall bureau will look like.

That’s leaving both advocates and critics completely unsure of what 2017 holds for the high-profile and controversial agency.

“We are in uncharted territory,” said Mike Litt, consumer program advocate for the U.S. Public Interest Research Group. “We certainly support Director Cordray finishing his term. We don’t believe President-elect Trump will be able to fire him. But if he tries, we will fight him.”

{mosads}With Republicans eager to overhaul the Dodd-Frank Act, and the agency fighting a legal battle over its status as an independent agency, there are any number of paths the CFPB could take in the months ahead.

The agency’s first and only director, Richard Cordray, has a term that technically does not expire until the middle of 2018. Some of Obama’s financial regulators have already announced plans to step down as Trump takes power, but Cordray is currently vowing to ride it out, in no rush to hand the reins to the GOP.

“Director Cordray was confirmed by a bipartisan group of 66 senators to serve a term until July 2018 and has no plans to step down,” said Jen Howard, the agency’s spokesperson.

Just a few months ago, Cordray likely would have been able to do just that. But a recent court ruling has thrust that into question, potentially handing Trump the power to remove him from his position. In October, the U.S. Court of Appeals for the D.C. Circuit ruled that the bureau is not actually an independent agency, but rather should be seen as part of the administration.

A three-judge panel ruled 2-1 that the current structure of the agency is unconstitutional, arguing that placing a single director in charge of an independent agency hands too much power to a single person.

And the practical takeaway of the ruling is that, if it stands, President Trump would be able to remove Cordray at will and nominate a new director. Prior to that ruling, Cordray could only be removed as head of the agency “for cause,” a much higher standard requiring actual wrongdoing by Cordray to force a removal.

But that ruling has yet to take effect, as the CFPB has filed for an en banc review of that ruling by the full court that is still pending.

If that ruling is overturned, Trump would face a tall order removing Cordray. According to Litt, no president has been able to remove a top official from an independent agency for cause in the modern era. In the most recent case, President George H.W. Bush saw his efforts to remove several top officials at the U.S. Postal Service thrown out by a federal court in 1993, following a dispute over postal rates.

But while that legal fight plays out, the CFPB faces another wave of changes coming from Congress. GOP lawmakers have tried for years to change the agency’s structure, replacing the director position with a bipartisan commission. Furthermore, Republicans want to bring the agency’s budget under the power of appropriators, and strengthen the ability of other regulators to veto the CFPB’s rulemakings.

Republicans have long argued the agency is too powerful and requires more checks, but so far Democrats have refused to go along with the idea. But faced with the prospect of a Trump appointee singlehandedly running the agency, some are hoping reform talks could gain momentum.

“All the Democrats that keep wanting no changes to the CFPB, they just want a sole director? Well, they’re about to get their wish,” said Richard Hunt, president and CEO of the Consumer Bankers Association, which frequently spars with the agency.

Hunt said the industry is pushing for a commission even with the possibility of a friendly Trump appointee in charge. The prospect of dramatic swings in CFPB operations every election cycle is a tricky prospect for financial companies trying to play by its rules.

“We don’t want the whipsaw effect every two to four years,” he said. “We’ve spent billions of dollars to comply with Dodd-Frank. If we keep going with the whipsaw effect, it’ll be more money.”

Meanwhile, Litt said consumer advocates are prepared to mobilize support for the agency if Congress does try to push through changes.

“The CFPB is really the poster child of a government agency that is actually doing the work that it’s supposed to be doing,” he said. “We could withstand a director that isn’t doing his or her job properly for a short period of time. But we have to keep the structure the way it is because that’s what’s allowed the agency to be as successful as it has been.”