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CFPB challenges court ruling that finds its structure is unconstitutional

Richard Cordray, director of the Consumer Financial Protection Bureau, arrives for a meeting Nov. 16. Last month, a federal appeals court dealt a major blow to the agency by calling for it to be restructured so that the director could be removed by the president at will. (Alex Wong/Getty Images)

The Consumer Financial Protection Bureau is fighting back against a recent court ruling that found the structure of the agency is unconstitutional.

Last month, a federal appeals court dealt a major blow to the agency by calling for the CFPB to be restructured so that the director could be removed by the president at will. The decision, if unchallenged, could have allowed Director Richard Cordray to be replaced by President-elect Donald Trump before the end of his term, which expires in 2018.

The agency petitioned the ruling Friday on the grounds that the decision, if left to stand, would interfere with Congress’s ability to create independent agencies run by a single director. In the petition, the agency said the ruling could also affect other independent agencies, pointing to the Social Security Administration, the Federal Housing Finance Agency and the Office of Special Counsel. When the CFPB was created, it was structured so that the director could be removed for only cause, shielding the role from some political shifts in Washington.

The move was widely expected, but it provides further evidence that the CFPB is doing its best to continue with business as usual, despite having come into political crosshairs since the presidential election. Trump has not talked in detail about how he would like to reform the CFPB, but his transition team has said that he would like to repeal the Dodd-Frank Act that led to the creation of the agency. Previous efforts by some lawmakers to weaken the agency may become more plausible starting in January, when Republicans will have control of both chambers of Congress.

The court case is related to an enforcement action the CFPB took against mortgage lender PHH for allegedly participating in an illegal kickback scheme. After PHH appealed the bureau’s decision to the U.S. Court of Appeals for the District of Columbia Circuit, a three-judge panel reversed the enforcement action and two judges ruled that the structure of the agency was unconstitutional. But the court also ruled against eliminating the CFPB, saying instead that the agency should be restructured.

The CFPB is now asking for the case to be reheard by the full D.C. Circuit, a request that is rarely granted. If the panel agrees to rehear the case, the move could invalidate all or part of the October ruling.

The bureau has shown few signs of slowing down since the presidential election. On Thursday, the agency launched an inquiry into the challenges consumers face when accessing their financial data through third-party websites and apps. The move, which is typically the first step in the agency’s rulemaking process, shows that the CFPB is moving ahead with its regulatory agenda. The bureau could also announce more enforcement actions before the end of the year.