CFPB Director Gets Second Chance at Independence Fight (Audio)

as the d C Circuit. The case, which involves kickback allegations against a mortgage lender, will now be taken up by the full DC Circuit, with its majority of Democratic appointees. It's all happening against the backdrop of a congressional battle over the cfp B and the Dodd Frank law that created it. Republicans want to ease the burdens they say

the law has placed on the financial industry. With us to talk about the legal fight over the cfp B. Our Dai him In is a professor at the University of Connecticut School of Law and Christopher Peterson, professor at the University of Utah College of Law DAIA. Let let me start with you. The earlier ruling had several aspects to it, but let's let's cut to the part of it that deals with the president's power to fire the director of the CFPB. Can you just explain what the

panel said about that issue? Yeah, sure, Um. The panel decided that, um, it didn't the separate from the sort of um statutory problems um that the PhH Company was bringing against the CFPP, they would decide they would look at whether or not the structure of the CFPP is actually constitutional um, and which uh, maybe it was something

that they didn't actually have to do. And in doing that, they decided that it was unconstitutional that um, there was only one director and that they could only be uh that that director could be fired um, only for cause um. And so they decided that uh that instead um uh, the way to fix it was to say to basically rewrite the statute and say that the director can be fired for any reason at the will of the president um. And so obviously making it a lot easier for now

President Trump to fire the director. But now that decision has been vacated, now that the Full Court has decided to hear the decase again. And Christopher, what is the reasoning for the Full Court taking on the case. Well, I think the Full Court is is recognizing that the case, first off, is very important that it has significant implications both for this new UH consumer Protection Agency, but also

for the power of the presidency of the United States. UH. And what's more, I think that the it's I think it's fair to say that the DC Circuit panel opinion was um someone uncharitable to the motives and the structure

of the CFPB. So I think that, you know, look to take away is that the the entire DC Circuit is going to look at the case and UH it has implications about whether or not President Trump will may be able to is effectively assert his agenda UH in in in you know, pursuing de regulatory goals for the

economy dai UM. As you mentioned, there's also a statutory component to this case, which is basically pH H arguing that the cfpv PP had changed what had been the common understanding of a law involving real estate settlements and then UH improperly applied it retroactively. When the d C Circuit yesterday said we want to reconsider this case, it sort of suggested that maybe we can avoid getting to those constitutional questions and just deal with that statutory issue.

Does that seem like a realistic possibility to you. UM, I think that's right. Actually, UM, I think it was surprising that the panel had asked for briefing on the constitutionality question, UM, and it's the case can totally be decided, and infect the panel really did decide it in the alternative on the statutory question, and h p H is basically one on the statutory question. So I think it is very likely, UM, that the that the full Court will decide, UM, you know, will make the decision on

those narrow grounds. Also not just for the reasons that Professor Peterson just pointed out, but also because UM, their decision, the panel decision had actually thrown into question, um, the constitutionality of the structure of the Federal Housing Finance Agency, which was actually created before the CFPP. UM, and that you know, you know, not a party to the case or anything. So H that may be another reason why

they might want to go narrower. And so just I understand you you're suggesting that what could happen would be that PhH could win on that narrower question, and then the Court would never have to deal with the question of whether the whole structure of the the CFPP is unconstitutional, that's right. I mean they could win or lose. You know, they could decide it the same way or a different way. But but the case could be entirely decided on the

question of the statory questions. I think, Christopher, the twelve judge panel that will be hearing it will include Chief Judge Merrick Garland, whose Supreme Court nomination Republicans refused to consider.

Does the panel being Democratic or Republican or center? Well, so, first off, with respected Judge Garland, He's a consummate professional, and I have absolute confidence that he'll do nothing other than follow the law and his best ambitions about you know, realizing what the how the laws of the United States should be interpreted. That thinks that the three judge panel that decided the decision below leaned fairly far to the right, or that's the way that people would normally conceptualize it.

But the DC circuit itself the broader UH Court now and recently it's balanced, and power has shifted somewhat to the left with some recent Obama appointees. But I also want to caution that, you know, a lot of the questions that are here are not really very easily sort of tracked out on a you know, a traditional left right Democrat Republican spectrum. Some of the questions that issue are questions of constitutional power and separation of powers that

are not just regulation good or regulation bad. So I do think that it's a little bit difficult to predict how the DC Circuit would rule on the independent regulatory

agency question. Uh, you know that being said, I think that Professor Jimenez is exactly right that the fact that the d C Circuit has granted him bank review may be signaling that some of the judges are, perhaps the majority of the judges may prefer to resolve the questions in the case on statutorial statutory grounds rather than confirming

the more difficult, broader reaching constitutional questions. And I just want to correct I understand now that the Chief Judge Merrick Garland is not going to be participating in this case. Greg dally Um. One thing that has puzzled me a little bit. It seems like there was Richard Corday, the director,

has been very controversial. Republicans have been highly critical of him for being too aggressive, and it seems like until until this order to rehear the case came out, there was a little window where Donald Trump could have fired

him for any reason at all. Are you surprised that the president didn't take advantage of that, Um, Well, I'm not sure there was such a window actually, because the case when um, the CFTV sought on bunk review, Uh, the the decision was stayed while the court decided whether or not the full court decided whether or not to

grant on bunk review. So I think, um, the sort of correct legal thing to do there was just to wait until the court decided whether or not to grant on bunk and if they had denied it, um, then depending exactly what that word it looked like, then perhaps you know, if the CFPP didn't immediately file for a certain certain petitions and Supreme Court, uh, there might have

been a small window. I mean, I think the right thing is really to you know, let the courts make this decision, um, at least to to get a chance at it. Um. So I'm glad that that I think that, uh, you know that that was not circumvented, Christopher. The Republicans have many options outside of court to use against the CFTB, So they could have legislation they're considering that would change the leadership from a single director to a five person commission.

What are some of the other things that they could do and how likely is it that they would Well, I think that, UM, I mean the big the biggest options that they have is clearly to pass new legislation to reform the Dodd Frank Act and the portion of the Dodd Frank Act and the Consumer Financial Protection Act that created the CFPB. And that's that's something that is a viable legislative strategy. Uh. They do face the prospect

of potential filibuster in the Senate recalled that. Uh. You know, one of the the sort of uh founding thought leaders for the creation of the CFPB was then Professor Warren now Senator Warren. Uh. Presumably, if there's anything that rules back on the cfpbs powers to aggressively, you can anticipate that she would attempt a filibuster. And and unless the Senate is willing to change its rules, whatever changes that the Republicans Congress wants to get to, the agency would

have to surmount that sixty vote barrier. So who knows how that's going to shape out. Other but there are with respect that not just the structure of the agency but particular matters that the agency may be working on, such as regulations that are pending or enforcement actions that rely on particular statutory provisions. There are also potential options

that the Republicans have there as well. So, for example, there's a regulatory review statute that allows Congress to invalidate regulations that are adopted by the agency with by voting to do so in Congress, and that that could potentially create another independent obstacle to some of the agenda that Director Cordrey has laid out. Christopher has inadvertently teased a later portion of the show, We're gonna actually talk about the Congressional Review active very important law that I confess

I didn't know anything about until until a few weeks ago. Um, you could back to the legal fight. Um, the how does this play out in terms of the CFPB and the Trump administration? As I understand that the CFPB has independent litigating authority, so that at the on Bond DC circuit and perhaps elsewhere. Um, could we see the CFPB up against the Trump administration. Huh, That's that's an interesting question.

I don't actually think that they have I mean, I think they still have to go through the Department of Justice to UH. They have to do that too. For restipcase might might actually know more. But I think that's right that they would not be able to UH. I mean that would be very odd. You've stunned me. I do Christopher jump in if you if you have have

thoughts on it. Sure, No, it's it's perfectly understandable that there's there's some ambiguity here, and it's you know, the agency is still a young agency, so it's still working some of these things out as they go along. So, but the agency does have independent litigation authority, and unlike say some of the other agencies, does not have to rely on the Department of Justice's attorneys to to bring litigation enforcement litigation in court. That's one of the sort

of key features of the Dodd Frank Act. But that being said, generally speaking, that Bureau has relied on the Solicitor General's Office in UH a Supreme Court matters UH, And that could create a potential issue in the event that petition for curtiary was granted by the Supreme Court. But that's the bridge that hasn't been crossed yet, and there's a good chance that that that won't actually happen now that the d C circuit may be signaling that

it's going to sort of extinguish this case. Of course, I don't want to predict that with any real certainty. They don't hand out crystal balls with tenure at my university. But UM, at least for its time being before the courts tell us how important and what the role of the CSPB is. UM. And actually I think this is one of the sort of positives of the physician, you know, coming back being in the news again. Is the CSTB UM. You know, it's really the one agency who they're protecting

consumers UM and UH. One of the reasons why it would be very difficult for President Trump to fire Director Cord for cause is because it's been doing a you know, stand up job of protecting consumers. Almost twelve billion dollars UM have been returned to consumers, thirty million UM consumers

have received relief. UM. You know, companies have who have been violating the law UM in all sorts of different financial areas have been ordered to you know, change their practices, to correct them, to uh, to rest to give restitutions to consumers. UM. And I think that that's something that we need, you know. And then the reason it was created was because we thought, um, this might have prevented the financial crisis. Um. Perhaps the hope is that it

will prevent the next financial crisis. And um uh, that's something that you know, I think we should all want. I want to thank our guest Dalia Jimenez the University of Connecticut School of Law and Christopher Peterson of the University of Utah College of Law, talking about new developments in the legal fight over the Consumer Financial Protection Bureau. Coming up on Bloomberg Law, we'll talk to former Senate Democratic Majority Leader George Mitchell.