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A gut-punch for the CFPB: Court rules independent director is unconstitutional

Joe Mont | October 11, 2016

Delivering a major setback to an agency that has, until now, successfully batted away challenges to its authority, a 2-1 ruling Tuesday by the U.S.  Court of Appeals for the D.C. circuit says that the Consumer Financial Protection Bureau, as currently composed, is unconstitutional.

The ruling in the matter of PHH Corporation, et al v. CFPB invalidates a provision in the Dodd Frank Act, when it created the agency, which established a director who is removable only for cause. The President, the majority justices said, must have the authority to remove the CFPB’s director at will.  

The decision addresses a legal challenge filed by New Jersey mortgage services company PHH Corp. It challenged a $109 million enforcement action brought against it by the CFPB for alleged violations of the Real Estate Settlement Procedures Act, arguing that the agency had neither the...

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