Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau A federal appeals court ruled the Consumer Financial Protection Bureau must be restructured because its current setup is unconstitutional. The decision will require an immediate agency restructure.
NPR logo

Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau

  • Download
  • <iframe src="https://www.npr.org/player/embed/497563933/497563936" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau

Law

Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau

Appeals Court Orders Restructuring Of Consumer Financial Protection Bureau

  • Download
  • <iframe src="https://www.npr.org/player/embed/497563933/497563936" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

A federal appeals court ruled the Consumer Financial Protection Bureau must be restructured because its current setup is unconstitutional. The court said the CFPB's director is not sufficiently answerable to the president. The decision will not force a shutdown of the agency but will require an immediate restructuring.

AUDIE CORNISH, HOST:

A federal appeals court has mandated big changes to the Consumer Financial Protection Bureau. The three-judge panel says the consumer watchdog agency is set up in a way that's unconstitutional. In its ruling, the court says the agency will have to restructure. NPR's Yuki Noguchi reports.

YUKI NOGUCHI, BYLINE: The suit was brought by a mortgage lender called PHH, which asked the court to invalidate a $109 million enforcement action against it and scrap the agency, too. The D.C. Court of Appeals sent the fine back to the bureau for review.

But it also ruled that the CFPB's director has too much power to write and enforce rules without enough oversight from another branch of government. The remedy, the panel says, is that the CFPB should fall under the president's control. And the president should be able to remove the director at will.

The CFPB's opponents in the financial services industry declared victory. Bill Himpler is executive vice president for the American Financial Services Association.

BILL HIMPLER: Our issue is still with the authority given to a single director. That is, as the court pointed out, not subject to a lot of oversight.

NOGUCHI: Himpler instead supports a CFPB run by a bipartisan commission, similar to others like the Securities and Exchange Commission. David Reiss, a law professor at Brooklyn Law School, says the ruling is not an existential challenge to the CFPB or its past decisions.

DAVID REISS: The decision does not invalidate the CFPB's actions. This is more about its structure going forward.

NOGUCHI: Reiss says an appeal to the Supreme Court is all but guaranteed. Indeed, the CFPB says it disagrees with the conclusion. In an emailed statement, a spokesperson says the ruling does not change its mission and that it is, quote, "considering options for seeking further review of the court's decision."

Dennis Kelleher is CEO of Better Markets, a group that advocates for stronger financial regulation. He says the bureau's actions on banks have made the financial sector more determined to undercut the agency.

DENNIS KELLEHER: They do not want a consumer watchdog on the Wall Street beat. That's what this fight is about.

NOGUCHI: The decision was not unanimous on all the issues. Judge Karen Henderson dissented in part, saying the panel overreached in calling the bureau's structure unconstitutional. Yuki Noguchi, NPR News, Washington.

[POST-BROADCAST CORRECTION: We incorrectly identify the U.S. Court of Appeals for the D.C. Circuit as the D.C. Court of Appeals, which is a different court that covers local matters.]

Copyright © 2016 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Correction Oct. 12, 2016

We incorrectly identify the U.S. Court of Appeals for the D.C. Circuit as the D.C. Court of Appeals, which is a different court that covers local matters.