A federal appeals court has ruled the Consumer Financial Protection Bureau unconstitutional, the second such legal setback for a provision of Dodd-Frank this year.
The decision came Tuesday and found for a mortgage lender in a closely-watched case. The court said a lack of oversight in the bureau’s structure ran afoul of the law. However, rather disband it altogether, the court ordered it restructured by giving the executive branch more control over the appointment and removal of its executive leadership.
The decision found the CFPB was a “gross departure” from the how similar agencies are structured, the latter of which typically include commissioners and board members.
When originally forming the agency, Congress gave the CFPB director “more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president. It possesses enormous power over American business, American consumers and the overall U.S. economy.”
In its decision to allow the CFPB to “continue to operate and to perform its many duties,” the court said it “will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury.”
MetLife earlier this year won its legal victory against the Financial Stability Oversight Council, which also was created by Dodd-Frank, in order to drop its designation as a “systemically important financial institution.”
Created in the aftermath of the 2008 economic crisis, the controversial Consumer Financial Protection Bureau was headed by Elizabeth Warren prior to her election to the Senate.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
