U.S. Court Rules CFPB Structure Unconstitutional; Bureau Can Still Operate

A federal appeals court on Tuesday declared the U.S. Consumer Financial Protection Bureau’s structure unconstitutional because too much power is vested with its sole director, but said it can continue operating under the president’s supervision.

The U.S. Court of Appeals for the District of Columbia Circuit threw out the bureau’s $109 million penalty against PHH Corp. PHH objected after the CFPB accused the lender in 2014 of referring customers to mortgage insurers who in turn bought reinsurance from one of its units.

The bureau, created by the 2010 Dodd-Frank financial reform law, cast the reinsurance payments as improper kickbacks and imposed the penalty in June.

Neither the CFPB nor PHH immediately responded to requests for comment.

In the ruling, U.S. Circuit Judge Brett Kavanaugh said unlike other independent agencies not accountable to the president whose leaders are instead checked by commissions, the CFPB had a “novel” structure in which a single person headed it.

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