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May 2, 2016
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Congress, Courts Question CFPB’s Reach
Photo by The Associated Press TAKING QUESTIONS: Consumer Financial Protection Bureau Director Richard Cordray, center, and, left and right, his CFPB colleagues David Silberman and To-Quyen Truong listen to a speaker during a a hearing. By Ted Craig
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The Consumer Financial Protection Bureau faces increased scrutiny from both the courts and Congress over its reach and structure. The U.S. District Court for the District of Columbia recently denied a request by the CFPB for an order requiring a group that accredits for-profit schools to comply with a civil investigative demand. The court rejected the argument that the group falls under its jurisdiction even though it isn’t involved in financial aid decisions at the schools it accredits. The court is also considering a
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case in which mortgage lender PHH Corp. contends the CFPB exceeded its authority when it levied a fine that was 17 times larger than what its own administrative judge had decreed. The PHH case is bringing up questions about the CFPB’s structure, especially how it’s funded and that its director is appointed for a five-year term. Attorney Michael Thurman said these are issues about the CFPB that were present when it was created. It just took time for a case to reach the federal courts. It also took a respondent willing
to fight the CFPB at this level, in part because it faces a penalty greater than its legal costs. The CFPB seeks $109 million from PHH. Thurman said that if the CFPB loses this case, it faces two unfavorable options. One is to let the decision stand, but this would create a precedent others could use as a defense. The CFPB’s other option is to take the case to the U.S. Supreme Court. If the court rules against the CFPB, however, it could cause the regulator to overhaul its structure. All this could benefit the auto finance industry.
What would definitely help, however, is a bill working its way through Congress that directly affects the CFPB’s authority. Last year, the U.S. House of Representatives passed the Reforming CFPB Indirect Auto Financing Guidance Act. Sen. Jerry Moran (R-Kan.) recently introduced a version of the bill in the Senate. “The CFPB is under intense scrutiny for the documented way it has manipulated and ignored data in its attempt to regulate through enforcement action,� said Jeff Carlson, chairman of the National Automobile Dealers Association.
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