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Lending

The war around CFPB Director Richard Cordray

#DefendCFPB

January 9, 2017

The controversial position Consumer Financial Protection Bureau Director Richard Cordray sits in is only intensifying as government officials push to have him fired and policy groups urge consumers to defend him.

From surprisingly grabbing the role from Elizabeth Warren to getting grilled by Congress on the impact of financial regulations, the former Ohio attorney general has spent a lot of time in the hot seat. Most recently, HousingWire’s own Magazine Editor Sarah Wheeler argued that the CFPB’s enforcement approach is smoothing innovation in the mortgage industry.

But nothing compares to Cordray’s current situation, as his entire role at the CFPB, along with the CFPB itself, lies in question.   

PHH won a landmark victory against the CFPB back in October 2016 after the United States Court of Appeals for the District of Columbia Circuit shockingly handed an earth-shattering victory to PHH, declaring the CFPB’s leadership structure unconstitutional and vacating a $103 million fine against PHH.

The move quickly escalated the viability of Corday getting kicked out office, following continuous talks from the House Financial Services Committee on the lack of accountability at the bureau.

In a unanimous decision of the three justices of the United States Court of Appeals for the District of Columbia Circuit, the court ruled that the CFPB’s current structure allows the director to wield far too much power, more than any other agency in the government.

In short, the court stated, the director of the CFPB is the “single most powerful official in the entire U.S. Government, other than the President,” in terms of unilateral power.

As a result of the decision, the CFPB will operate as an executive agency. The President of the United States will now have the power to supervise and direct the Director of the CFPB, and may remove the director at will at any time.

The CFPB, however, isn’t going down without a fight. Shortly thereafter in November 2015, the CFPB filed for an en banc review with the D.C. Court of Appeals, meaning that it wants the entire court to hear the case, rather than the three judges who ruled on the case in October. This is where the case still currently sits. Here’s the latest update on the case.

As America awaits a decision, politicians are trying to go a different route to get Cordray removed as director. Under the current law, the president may remove the director for “inefficiency, neglect of duty, or malfeasance in office.”

An article from the American Constitution Society for Law and Policy, however, noted that no president has removed an appointee for cause. “Most presidents have not attempted it and the three times a president has tried to remove an official with for-cause protections—on the ground that the for-cause protection were invalid (not that there was cause for removals)—the courts stopped the president from doing so.” The group urged that Cordray shouldn’t be the first.

But this isn’t stopping Republican politicians from pushing for it. On Monday, U.S. Sens. Ben Sasse, R-Nebraska, and Mike Lee, R-Utah, urged the incoming administration to fire Cordray in a letter.

"It's time to fire King Richard," said Sasse, a member of the Senate Banking Committee. "Underneath the CFPB's Orwellian acronym is an attack on the American idea that the people who write are laws are accountable to the American people. President-elect Trump has the authority to remove Cordray and that's exactly what the American people deserve."

“The Constitution was written to protect the American people from unelected and unaccountable bureaucrats,” said Lee. "Considering the damage CFPB has done to credit unions and community banks, President Trump should act quickly to remove the director."

However, policy groups are standing in the line of fire for Cordray and even made #defendCFPB one of the top trending hashtags on Twitter on Monday.

Michael Calhoun, president of the Center for Responsible Lending, a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practicesm published a piece on The Hill asserting that Americans can’t afford to lose Cordray or the CFPB.  The article, which was published on Sunday, helped to rally support behind the trending hashtag.

Calhoun stated, “In its five years as an agency, the CFPB has recovered more than $11 billion for 27 million consumers harmed by illegal practices of financial institutions. The bureau has secured relief in more than 100 cases, directly putting money back in the pockets of American consumers who have been victimized by companies that refuse to follow the law.”

It’s this same passionate support for the CFPB that fueled many of the tweets seen below. 

For now, the future of the CFPB and Cordray rests in the fate of two different situations. The first, which urges President-elect Donald Trump to fire Cordray, obviously requires Trump to be president. He doesn’t even take the position until Jan. 20.

The second situation has an even looser timeline as the court reviews the CFPB’s en banc review request. So for now, we can only wait and see. 

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