Appeals court CFPB ruling a big win for consumers

In 2016, a panel of three judges of the U.S. Court of Appeals for the D.C. Circuit held that the structure of the Consumer Financial Protection Bureau (CFPB) was unconstitutional.

The CFPB has a single executive (unlike some agencies, which are headed by a multi-person commission), and the CFPB’s head can only be removed by the president for a good cause, not just any political reason. The panel found that this was an infringement upon the president’s proper constitutional powers.

{mosads}Wednesday, the D.C. Circuit voted 7-3 in an en banc decision (meaning the entire court heard the case, not just three members picked at random) to overturn the panel and held that the CFPB’s structure is indeed constitutional.

The decision of the full court, in an opinion by Judge Cornelia Pillard, tells us something very important about other challenges to the current leadership of the CFPB — that it is essential (and the Congress that passed Dodd-Frank considered that it was essential) that the bureau be independent.

Hopefully, this conclusion — that the CFPB must be independent — will help with legal challenges to the current, industry-co-opted and politically driven leadership to the agency. President Trump has appointed Mick Mulvaney to direct the agency (at least on an interim basis).

Mulvaney is simultaneously the head of the Office of Management and Budget, an agency that is as political and closely tied to the White House as any agency in the executive branch and has repeatedly operated in ways that favor the interests of regulated entities (particularly payday lenders) over those of consumers.

Wednesday’s court ruling underscores the importance of Trump quickly appointing a permanent director for the agency who is truly independent and who is not moonlighting as the country’s chief consumer watchdog while also regularly working with the White House on political matters pertaining to another agency.

The court noted that a major cause of the 2008 financial crisis was the fact that the principal banking regulators who existed before Dodd-Frank created the CFPB “gave short shift” to consumer protection and instead were too close to the banks, payday lenders and other regulated lenders.

When Congress acted to try to prevent another future financial crisis (after all, many millions of Americans lost their homes in foreclosures that were foreseeable and preventable because of abusive banking practices in the years running up to 2008), it made a very conscious decision to make the CFPB independent.

Judge Pillard’s decision explains that this independence is “essential to the proper functioning” of the CFPB, which is a central reason why its structure is constitutional.

Hopefully, this thoughtful decision will bolster some of the pending legal challenges to Mulvaney’s position as the head of the agency. As Mulvaney keeps issuing new decisions to attack core consumer protections, hopefully Wednesday’s decision will bolster future challenges to CFPB actions that favor deep-pocketed banking industry players over consumer protection.

Americans must have faith that the CFPB is acting in their interests and not doing the bidding of well-heeled political donors looking for a return on their campaign investments.

Because while Wednesday’s ruling makes clear that a single director is the lawful head of the CFPB, it also strongly suggests that the director must be above politics and not, as Mick Mulvaney is, submerged in them.

F. Paul Bland, Jr. is the executive director of Public Justice, a legal organization that advocates on behalf of consumers, employees, civil rights and the environment.