A federal appeals court on Thursday denied efforts by 16 Democratic attorneys general, several consumer groups and two Democratic lawmakers to defend the Consumer Financial Protection Bureau in a critical case that could determine the fate of Director Richard Cordray.

A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit denied three separate motions filed by Democrats and consumer groups last week to intervene in the controversial case, PHH Corp. v. CFPB.

The same panel ruled in October that the CFPB's single-director structure was unconstitutional. That controversial ruling found that a provision of the Dodd-Frank Act that only allowed the CFPB's director to be removed for cause was unconstitutional. The panel said that the CFPB's director can be removed at will by the president, but the decision was stayed by Judge Brett Kavanaugh while the case is on appeal.

CFPB Director Richard Cordray
If the court ruling is allowed to stand, CFPB Director Richard Cordray can be fired at will by the president. Bloomberg News

The CFPB has requested an en banc rehearing of the case to the full D.C. Circuit. But the panel's ruling further limits the agency's ability to prevail in the case.

If the D.C. Circuit denies the CFPB's appeal, a Justice Department under Attorney General-designate Jeff Sessions is unlikely to defend the CFPB before the Supreme Court. By denying the ability of Democrats to intervene, the panel took away the chance for another party to step in to defend it.

The attorneys general for 16 states and the District of Columbia had cited the Trump administration's opposition to Dodd-Frank Act reforms and the impact the ruling would have on coordinating with the CFPB to enforce consumer financial protection laws.

The consumer groups that also sought to intervene in the case included Americans for Financial Reform; the Center for Responsible Lending; the Leadership Conference on Civil and Human Rights; Self-Help Credit Union; the United States Public Interest Research Group; and Maeve Brown, the executive director of Housing and Economic Rights Advocates.

Republicans have long assumed that one of the first orders of business under a Trump Justice Department would be to end the CFPB's appeal of the PHH case. Doing so would allow the three-judge panel's decision to stand and allow the president to remove the director at any time.

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