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Justice Department Urges Supreme Court to Protect CFPB

The U.S. Department of Justice (DOJ) has filed a brief with the United States Supreme Court in a case challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB), urging the Court to protect the Bureau due to its “critical work” on behalf of American consumers. This is according to a copy of the brief obtained by RMD, and original reporting by Mortgage Professional America (MPA).

In the brief, DOJ defends the single director structure of the Bureau, which the petitioners contend is unconstitutional and which sits as the core issue that the nine Justices will have to decide. Because of the CFPB’s dedicated focus to consumer protection and because of its enforcement actions and collected damages, DOJ argues that the Bureau should remain in place.

“The Bureau is the federal government’s only agency solely dedicated to consumer financial protection,” the DOJ brief reads in part. “It has issued numerous significant rules, obtained billions of dollars in relief through enforcement, and reached millions of consumers through its education functions. Invalidating Title X would lead to grave doubt as to the validity of those rules and eliminate the safe harbors Congress established for regulated entities who relied in good faith on them.”

Additionally, DOJ contends that not only would invalidating the structure of the CFPB be damaging to the mission of consumer protection, but certain legal protections and authorities would be either altered or eliminated, and some of the Bureau’s duties would even be re-delegated to other agencies which no longer function.

“It would eliminate important new consumer protection authorities. It would undo substantive amendments to several consumer protection statutes. And it would require unwinding the transfer of functions and staff to the Bureau from seven transferor agencies, one of which, the Office of Thrift Supervision, no longer even exists,” the brief continues.

The case for which the DOJ brief was filed, Seila Law LLC v. Consumer Financial Protection Bureau, asks the Court to decide on whether the vesting of substantial executive authority in the CFPB – which features a high degree of independence and is led by a single director who is difficult to remove from office – violates the Constitutional principle of the separation of powers between the branches of the federal government.

As it currently stands, the single director of the CFPB cannot be removed from his or her position at the sole discretion of the President of the United States unless there is very good reason to do so, as described in the Dodd–Frank Wall Street Reform and Consumer Protection Act that brought the CFPB into existence. In its objection, Seila Law argues that the CFPB’s structure is unconstitutional due to its leadership structure.

The contention that the single director structure of the CFPB is actually supported by the incumbent director herself, Kathleen L. Kraninger, according to a previous brief filed with the Supreme Court by the Trump Administration. The Court is expected to hear oral arguments in the case next month.

Read the MPA story and the brief at the DOJ.