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There is a fierce tug of war over the future of the CFPB

Consumer Financial Protection Bureau Director Richard Cordray answers questions at a summit in Washington on Oct. 23, 2013. (Jonathan Ernst/Reuters)

Democrats and consumer groups are stepping up their efforts to defend a federal consumer watchdog that has come under increased attack since the election.

Several Republicans have intensified their efforts to weaken the Consumer Financial Protection Bureau over the last couple of weeks by calling on Trump to fire its director, Richard Cordray, who they claim has too much power over businesses as the head of the independent agency. In response, Democrats and consumer groups have touted the director’s track record of cracking down on big banks and corporations accused of misleading consumers. And now, they are taking steps to help defend the agency — and its director — in court.

Some top Democrats, along with consumer advocates and 17 state attorneys general, filed several motions this week asking for the chance to help challenge a federal appeals court decision from late last year that found the structure of the agency is unconstitutional. If left to stand, the ruling would make it possible for the president to fire the director at will, creating the possibility that the director could be swapped out with each new administration. But when the agency was created under the Dodd-Frank Act, the agency’s director could only be removed by the president for cause.

“Any attempt to weaken the CFPB by disrupting its leadership or structure presents a real threat to consumers across the country,” said Mike Calhoun, president of the Center for Responsible Lending, which filed a motion to intervene in the case, along with other groups including Americans for Financial Reform, the Leadership Conference on Civil and Human Rights and the U.S. Public Interest Research Group. “It will revert us back to lax financial regulations and cause another painful economic crisis that we simply cannot afford.”

The CFPB appealed the ruling in November and is still waiting to learn whether the case will be reheard by the full D.C. Circuit panel — a decision that could potentially come over the next several weeks. But supporters of the agency are moving to intervene in the case now after several Republicans have seemingly tried to get ahead of the court decision by asking Trump to fire Cordray, whose term ends in July 2018, with cause or by calling on the director to quit.

Staunch CFPB critic Rep. Jeb Hensarling (R-Tex.), the chairman of the House Financial Services Committee, recently released a report alleging that Cordray may have violated federal law when he decided not to reopen the comment period for proposed auto lending rules, despite the advice of his attorneys. Meanwhile, Sens. Ben Sasse (R-Neb.) and Mike Lee (R-Utah) urged Trump to dismiss Cordray “promptly” after his inauguration, criticizing the regulations proposed by the CFPB and calling the independence of the agency “unconstitutional.”

On Thursday, a lawyer for the Constitutional Accountability Center — which filed a motion on behalf of Sen. Sherrod Brown (Ohio) and Rep. Maxine Waters (Calif.), the ranking Democrats on the Senate Banking and House Financial Services committees — said the lawmakers are trying to get involved in the case for a chance to help defend the agency’s independent structure, especially if the court rejects the CFPB’s request to rehear the case. If that happens, the agency could potentially take its appeal to the Supreme Court. But lawmakers and consumer groups want a stake in the case so that they could continue defending the agency, even if the Trump administration attempts to drop the case.

“By intervening, these members of Congress want to ensure that these questions are addressed in court,” said Brianne Gorod, chief counsel for the center.

A group of Democrats in the Senate Banking Committee, including Sen. Elizabeth Warren (D-Mass.), who helped to create the agency, wrote a letter supporting Cordray and touting his accomplishments. The lawmakers applauded the CFPB’s enforcement actions, such as last year’s $100 million fine against Wells Fargo for opening accounts without customers’ permission. Democrats pointed out that the agency has returned about $12 billion in relief to consumers.

Some Republicans have opposed the CFPB since its inception, arguing against the agency’s efforts, which they say limit lending and hurt corporations. But many critics escalated their efforts to rein in the agency after the election, with the hopes that they will have a greater success under a Republican administration.

Trump has yet to say anything publicly about Cordray or the consumer watchdog. But during his confirmation hearing, treasury secretary nominee Steve Mnuchin said he would be in favor of giving Congress more control over its funding by making it subject to the annual budget process. Currently, the agency receives its funding from the Federal Reserve.

The CFPB has stayed busy since the election, announcing multiple enforcement actions, including a lawsuit against student loan manager Navient for allegedly misallocating payments and steering people into costly plans and another suit against TCF National Bank for misleading consumers into signing up for overdraft programs. (Both companies deny the charges.)

Cordray said Tuesday in an interview with the Wall Street Journal that he plans to continue enforcing consumer protections at a “vigorous” pace. He said the agency’s job shouldn’t change “at all” under the Trump administration. “It’s important to keep in mind that we are a law enforcement agency,” Cordray said, adding that the role “has to be kept separate from partisan politics.”

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