WASHINGTON, D.C. — Not only did the U.S. Department of Justice side with the federal appellate court’s Oct. 11 ruling that the Consumer Financial Protection Bureau (CFPB) ’s single-director structure is unconstitutional, the DOJ agreed with the three-judge panel’s remedy.

The enforcement agency’s opinion was contained in an amicus brief filed on Friday, March 17, with the U.S. Court of Appeals for the District of Columbia Circuit in New Jersey-based PHH Corp.’s closely-watched challenge of the bureau’s authority.

The DOJ told the D.C. Circuit it should uphold the three-judge panel’s 2-1 ruling because “there is a greater risk that an ‘an independent’ agency headed by a single person will engage in extreme departures from the President’s executive policy.”

“The panel correctly concluded that the proper remedy for the constitutional violation is to sever the provision limiting the President’s authority to remove the CFPB’s Director, not to declare the entire agency and its operations unconstitutional,” the DOJ stated, in part.

In February, the full D.C. Court of Appeals granted the bureau’s request to reconsider last October’s ruling that the bureau’s structure is unconstitutional, vacating a decision that gave the president the authority to remove the CFPB Director Richard Cordray at will.

Prior to the appellate court's October ruling, the CFPB director could only be removed for cause.

In its two-page order, the D.C. Circuit directed the parties to address specific questions, including whether the CFPB’s structure is consistent with Article II of the Constitution — which says the president must be able to remove executive officers at will — and if the court can avoid deciding that constitutional question given the panel’s ruling on the statutory issues in the case. If the bureau’s structure is ruled unconstitutional, the court will decide whether severing the for-cause provision is the proper remedy.

The case came about after the bureau fined New Jersey-based mortgage lender PHH Corp. for allegedly accepting kickbacks from mortgage insurers. The lender appealed the fine, which led to Tuesday’s decision. And as part of that ruling, the federal appeal court threw out the bureau’s $109 million fine against PHH.

“Republicans have said for years that the bureau is unconstitutionally structured,” House Financial Services Chairman Jeb Hensarling (R-Texas), one of the bureau’s harshest critics, said in a statement issued shortly after the DOJ filed its brief. “I applaud the Department of Justice for recognizing this unconstitutional CFPB must not stand and must not continue to harm the very consumers it is supposed to protect.”

Briefing in the case is scheduled to conclude by April 10, and the D.C. Circuit is scheduled to hear oral argument on May 24.

Originally posted on F&I and Showroom

Gregory Arroyo

Gregory Arroyo

Editorial Director

Gregory Arroyo is the former editorial director of Bobit Business Media's Dealer Group.