Politics & MoneyMortgage

CFPB’s Kraninger agrees her job security is unconstitutional

Says president should be given more authority over bureau's leadership

Consumer Financial Protection Bureau Director Kathy Kraninger is siding against her own job security by agreeing with the administration that the CFPB director should be allowed to be fired by the President at will.

Back in 2017, a battle between the CFPB and PHH began, starting with a $103 million increase to a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks.

PHH challenged this ruling in court, and the fight ended, or so it appeared, with the CFPB’s leadership structure being declared unconstitutional by the Court of Appeals for the District of Columbia Circuit in a 2-1 vote.

The CFPB fought that ruling, asking the court to rehear the case en banc, meaning that it wanted the entire court to hear the case, rather than the three judges who ruled on the case previously.

As it stands now, President Donald Trump cannot fire the CFPB director unless it’s for cause. The previous decision made the CFPB director fireable at will, but that’s not the case anymore as the case continues to be challenged in court.

But now Kraninger is weighing in on the argument, and siding against her own position.

“I have decided that the Bureau should adopt the Department of Justice’s view that the for-cause removal provision is unconstitutional,” Kraninger stated in a letter she sent to House Majority Leader Mitch McConnell, R-Ky. and House Minority Leader Nancy Pelosi, D-Calif. “A Supreme Court decision holding that the for-cause removal provision is unconstitutional should not affect the Bureau’s ability to carry out its important mission.”

Kraninger explained in her letter that she will join the Department of Justice in supporting a review of the case by the Supreme Court. Currently the case is residing before the 9th Circuit Court of Appeals.

But the courts are not the only sector trying to decide the fate of the CFPB’s leadership. Back in 2018, a bipartisan group of two Republicans and two Democrats in the House of Representatives introduced a bill that would replace the single director of the CFPB with a bipartisan commission.

Under the legislation, the CFPB would be renamed the Financial Product Safety Commission and would led by five commissioners, instead of one director as it is today.

And in 2017, Sens. Deb Fischer, R-Nebraska; John Barrasso, R-Wyoming; and Ron Johnson, R-Wisconsin, introduced a similar bill that would have replaced the single director of the CFPB with a five-member bipartisan committee.

But according to Fischer's office, that was actually the third version of this bill, which she previously introduced in each of the previous two congressional sessions to no avail.

The move to change the CFPB from a single director to a bipartisan commission also has support from more than 20 of the housing industry’s largest trade groups.

The previous year, the groups sent a letter to the leadership of the appropriations committees in both the House and Senate, asking for Congress to pursue legislation that would allow a bipartisan commission to run the CFPB.

The letter was signed in part by the American Bankers Association, the American Land Title AssociationCommunity Mortgage Lenders of America, the Credit Union National Association, the Independent Community Bankers of America, the Mortgage Bankers Association, the National Association of Realtors, and others.

But the case pending in the 9th Circuit would not change the structure of the CFPB. Rather, the administration is arguing that the bureau has too much power, and that the director should be help accountable to the President by being able to be fired at will instead of for cause.

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