On January 23, Democratic attorneys general from 16 states and the District of Columbia filed a motion to intervene in the closely watched PHH Corp. v. Consumer Financial Protection Bureau case, currently pending in the U.S. Court of Appeals for the District of Columbia. As we reported here and here, in October 2016, a divided three-judge panel for that court held that the portion of the Consumer Financial Protection Act ("CFPA") stating that the CFPB's director could only be removed for cause was unconstitutional. The Court of Appeals struck the "for cause" provision, meaning that the President may now remove the director without cause. The CFPB has requested an en banc review of the October ruling before the entire D.C. Circuit. The request effectively stayed the October ruling. The Obama administration supported the CFPB's decision to request en banc review.
The motion highlighted the fact that the Trump administration has had a hostile attitude towards the CFPB and Director Richard Cordray. The motion cited statements from members of the Trump administration indicating that Trump wants to fire Cordray. The attorneys general are seeking to intervene in the case out of concern that the CFPB, if Cordray is replaced by a Trump appointee, or the Department of Justice may abandon the en banc review request and eventually appeal to the United States Supreme Court. In order to fully understand their concern, it is important to keep in mind that the constitutionality of the entire CFPA may be at issue.
Although the CFPA is a federal law, the attorneys general argued in their motion that the survival of the CFPB is vitally important to the interests of the states. "As the representatives of millions of citizens across the country, the State Attorneys General have used their express statutory authority to bring civil actions to enforce consumer financial protection laws and to pursue regulatory actions in coordination with the CFPB to protect consumers against unfair, deceptive, and abusive financial practices. The current ruling, if permitted to stand, will undermine the power of the State Attorneys General to effectively protect consumers against abuse in the consumer finance industry."
The attorneys general cited to examples in which they acted in concert with the CFPB to bring enforcement actions. They also cited examples of when they used the CFPA to bring enforcement actions in their home states without the CFPB, and highlighted the fact that the CFPA requires the attorneys general to receive permission from the CFPB before bringing actions under the CFPA. It is for the foregoing reasons that the survival of the Bureau and the CFPA is especially important to the attorneys general.
It should also be noted that the attorneys general did not shy away from the fact that they missed the 30-day deadline to file their motion to intervene. They argued that they had good cause to miss the deadline because Donald Trump was not yet the President-elect at the 30-day deadline and, therefore, there was no real threat that the United States Government would not try to fight for the survival of the Bureau. Trump's election solidified the imminent threat to the long-term future of the Bureau.
Connecticut Attorney General George Jepsen led the group of states in filing the motion to intervene. Attorneys general from Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, and Washington, and the Attorney General for the District of Columbia also joined the motion.
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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