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Govt. Calls for Review in Case Challenging CFPB Structure

Wed 04 Jan, 2017  /  by   /   Client Alerts

01/04/17 – Law360 reports that U.S. Government argued to the full U.S. Appeals Court in D.C. that a three-judge appellate panel wrongly determined that the CFPB’s single-director leadership structure was unconstitutional.

The United States Government, represented by attorneys from the U.S. Department of Justice, requested that the full appellate court review the case, including the decision from the court’s three-judge panel.

The October decision from the panel of the U.S. Appeal Court for the D.C. Circuit came from a bid by a mortgage servicer to escape a $109 million penalty over allegations that the company violated the Real Estate Settlement Procedures Act by referring consumers to mortgage insurers in exchange for reinsurance orders with its subsidiaries and reinsurance fees.

The Justice Department’s brief states that the divided panel was incorrect in determining that the presence of a single director atop the CFPB who can only be fired for cause by the president was a violation of the Constitution’s separation of powers. According the to brief, the remedy that the court put in place—giving the president the authority to fire the CFPB director at will—was unnecessary.

“While the court’s cases have not squarely addressed a structure like the one at issue here, the panel’s approach to resolving its constitutionality departs from the approach the Supreme Court has applied in resolving such separation of powers questions,” the brief said.

The Justice Department is calling for a full en banc review of the politically charged case, as the CFPB has requested.

It is unclear whether a future Justice Department under Sen. Jeff Sessions, R-Ala. (President-Elect Trump’s choice to serve as Attorney General) will back the CFPB in the case as it moves forward.

Law360.