Politics

Fed Judges Question Constitutionality Of Obama’s Prized Consumer Agency

A federal appeals court appears ready to declare the structure of the Consumer Financial Protection Bureau (CFPB) unconstitutional, a major blow to the first new agency created under President Barack Obama.

The possibility of dramatic action against CFPB arose in an oral argument Tuesday before the U.S. Court of Appeals for the D.C. Circuit. The National Law Journal first reported the hearing.

CFPB has been an aggressive regulator, allegedly bullying banks, mortgage companies and other financial institutions with costly actions designed to force compliance with the bureau’s anti-business rules on financial transactions. Many companies have fallen in line rather than contest the new bureau’s power.

Critics of CFPB have noted it is the only agency not accountable to congressional oversight and therefore violates the separation of powers set down by the Constitution. That principle provides that Congress have checks over the executive branch agencies like CFPB. Those checks do not apply to the agency.

In creating the bureau under the Dodd-Frank Act, the Obama administration housed the agency in the independent Federal Reserve Bank. The bank’s budget and operations are immune to congressional oversight and independent of the president.

The bureau also is one of the few regulatory agencies managed by a single director. Other regulatory panels like the Federal Election Commission and the Nuclear Regulatory Commission have multiple voting members.

There are additional checks and balances with the commission system as the commissioners are typically nominated by Republican and Democratic lawmakers.

The appeals court ordered CFPB’s lawyers to address whether other federal agencies had ever been headed by one person and, if such a structure violated separation of powers, what the court should do about it.

Federal Judge Brett Kavanaugh, one of the judges hearing a case brought by PHH, a mortgage lending company, was most outspoken in his concern about the bureau, saying it is “very dangerous in our system” to vest so much power in one person.

Kavanaugh was joined by Judge A. Raymond Randolph in launching a barrage of questions to CFPB lawyers about the constitutionality of the agency.

Do You Think The Consumer Financial Protection Bureau (CFPB) Is Unconstitutional?

  Yes         No       

Completing this poll entitles you to Daily Caller news updates free of charge. You may opt out at anytime. You also agree to our Privacy Policy and Terms of Use.

Ted Olson, the former U.S. solicitor general who now represents PHH, told the court of appeals that, “The president and the Congress have no power over this agency.”

If he were in the judges’ shoes, Olson said he’d be “tempted” to write an opinion that said Congress cannot create an agency with such broad authority. The judges appeared receptive to Olson’s arguments.

If the panel does declare the bureau unconstitutional, the government could ask the full appeals court to review the case.