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Federal Appeals Court Rules Structure of CFPB is Unconstitutional

A federal appeals-court panel dealt a setback to the Consumer Financial Protection Bureau, ruling that the financial agency’s structure is unconstitutional. According to the October 11, 2016 decision, the consumer-finance watchdog’s structure violated the Constitution’s separation of powers because the “concentration of massive, unchecked power in a single director marks a departure from settled historical practice.” The CFPB, which was created after the 2008 financial crisis, is an independent agency headed by a single director who can be removed by the U.S. president only for cause. The federal appeals court ruling allowed the CFPB to continue operating but as an executive agency, giving the president the power to supervise and direct the director of the CFPB and remove the director at will at any time. In the ruling, the court also set aside an enforcement action brought by the CFPB against a mortgage lender. In September, the House Financial Services Committee approved the Financial CHOICE Act, which seeks to roll back significant portions of the Dodd-Frank Act. Among the goals of the Financial CHOICE Act are to change the name of the CFPB to the “Consumer Financial Opportunity Commission (CFOC),” and to replace the current single director with a bipartisan, five-member commission subject to congressional oversight and appropriations.