Andrew Harris and Elizabeth Dexheimer, Bloomberg: CFPB Survives Legal Attack as Court Trims Director’s Power

The appellate court found the CFPB to be “unconstitutionally structured” because the autonomy vested in Director Richard Cordray–who could only be fired by the president and for cause–was a “gross departure from settled historical practice.”

But the three-judge panel rejected calls to dismantle the agency, instead voiding the for-cause provision and making the director removable by the president at any time and for any reason. “The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice or the Department of the Treasury,” the court ruled.

In addition to reducing Cordray’s powers, the appellate court threw out a CFPB decision imposing a $109 million penalty on a New Jersey mortgage-servicing company, PHH Corp.

The agency had punished the company for referring customers to insurers who then purchased reinsurance from a PHH subsidiary. CFPB determined those payments were part of an illegal kickback scheme. PHH said the law creating the CFPB gave an unaccountable director too much authority.

PHH’s lawyer, former U.S. Solicitor General Ted Olson, told appellate judges during arguments in April that Cordray “ran roughshod over clear provisions of federal law.” He called the bureau’s punishment of PHH “draconian,” remedial and unauthorized.

It’s what happens when the administration conspires to hide the seven layers of fraud that went on in the mortgage industry and led to the 2007 meltdown.  And does so to look forward and not backward.

The public still does not know what hazards await them in home mortgages or the fact that they still are beset with striking practices of discrimination.

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