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Court Won't Let CFPB Proponents Into Case to Defend Agency

Thursday, February 2, 2017

By C. Ryan Barber

A federal appeals court on Thursday refused to allow Democratic state attorneys general and other proponents of the Consumer Financial Protection Board to intervene in a case to protect the agency’s independence.

The decision from the U.S. Court of Appeals for the D.C. Circuit blocked 16 state attorneys general, top Democratic members of Congress and a coalition of consumer advocates from defending the agency in a fight over the constitutionality of its leadership structure.

The advocates told the D.C. Circuit they feared the Trump administration would not adequately fight for the agency, which arose from the dust of the 2008 financial crisis, in the months ahead. Donald Trump campaigned on, and later doubled down on, a promise to “dismantle” the Wall Street reform law that created the consumer bureau.

The full D.C. Circuit, in PHH Corp. v. CFPB, is weighing whether to review a panel ruling that said the White House should have greater power to remove the CFPB director at will, not exclusively for cause. The divided panel ruling in October called the agency director one of the most powerful positions in Washington next to the president.

The CFPB is permitted to represent itself in the federal courts. But the agency is required to consult the U.S. Justice Department before taking any case to the U.S. Supreme Court. That roadblock has fueled fears that the Trump administration could walk away from the case and fire the agency’s director, Richard Cordray, whose five-year term expires in July 2018.

Attorneys general for the District of Columbia and 16 states—including Connecticut, New York and Massachusetts—argued Trump’s hostility toward the Dodd-Frank reform laws made it necessary for them to come to the agency’s side. U.S. Sen. Sherrod Brown of Ohio and Rep. Maxine Waters of California, the top Democrats on the Senate and House banking committees also moved to intervene, as did advocacy groups including Americans for Financial Reform and the Center for Responsible Lending.

“While the court's order is disappointing, it doesn't preclude our clients or others from trying to intervene again should the full court grant the en banc petition or, even before that, if the administration were to take action against Director Cordray,” said Brianne Gorod, chief counsel of the Constitutional Accountability Center, which represented Brown and Waters.

Lawyers for the mortgage lender PHH Corp. opposed any intervention. PHH’s defense team at Gibson, Dunn & Crutcher argued the intervention push came too late and was motivated by factors that “were entirely and reasonably foreseeable more than a year ago.”

A spokeswoman for the Connecticut attorney general said the various state offices were reviewing the decision and “considering all options available to us in this case.” The CFPB declined to comment.