On the same day that House Democrats wrote to President-elect Donald Trump to defend controversial Consumer Financial Protection Bureau Director Richard Cordray, two Republican senators sent a letter to Vice President-elect Mike Pence to press for his removal. The letter, signed by Ben Sasse (Neb.) and Mike Lee (Utah), requested that Trump dismiss Cordray "promptly after his inauguration."
The senators immediately qualified the CFPB as "unconstitutional," and stated that Cordray's removal would align with Trump's Presidential oath to "preserve, protect, and defend the Constitution of the United States." According to Sasse and Lee, removing Cordray would rein in the agency, as the CFPB has "pursued a regulatory agenda that is harmful to the American people." Citing the checks and balances built into the Constitution, the letter argued that agencies have wielded increasing power in the past 80 years – a shift that is inconsistent with the Framers' intent.
The letter referenced favorably the D.C. Circuit's decision in PHH Corporation v. CFPB, and quoted its characterization of the CFPB Director as the "single most powerful official in the entire United States Government." Like the D.C. Circuit, the two senators called into question the structure of the CFPB as designed by the Dodd-Frank Act, noting that the CFPB gets its funding from the Federal Reserve instead of Congress and has its power vested in a single person rather than a multi-member panel. The letter further emphasized the President-elect's constitutional authority to remove the Director.
The two Republicans also argued that Cordray's agenda at the CFPB has harmed the American people, calling his tenure "disastrous," and quoted the President-elect's own website when describing the CFPB's initiatives as unnecessary and symptomatic of a bloated government. The letter hit directly at regulations issued by the Bureau, contending that its rules "have disproportionately burdened credit unions and community banks" and characterizing the forthcoming CFPB rule on arbitration as "based on flawed research."
Finally, the letter closed with an echo of Trump's campaign promises to decentralize power from the select few in D.C. and restore power to the American people. "[T]he CFPB's structure is based on the idea that government is unlimited and rights are dependent on the special dispensation of the experts who know better than the American people." The removal of Director Cordray would represent the "first marker in the long process of rolling-back an agency that combines the powers of the executive, legislative, and judicial branches into the hands of a few unaccountable Washington elites."
Even without the PHH decision, the President probably has authority to fire the Director "for cause." A new Director could order a halt to litigation and enforcement proceedings, whether pending or threatened. Any final regulations already in place cannot be formally withdrawn except by the rulemaking process. Their enforcement, of course, could be halted by a new Director. But for any proposed regulation that is finalized in the upcoming few weeks, the Congressional Review Act can be used to reverse.
A copy of the letter is available here.
The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here
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