Democratic AGs in 16 states ask to defend CFPB in key court case

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Democratic attorneys general in 16 states and the District of Columbia have asked to defend the Consumer Financial Protection Bureau in a controversial appeals court case, citing an "urgent" need to protect its director, Richard Cordray, from being fired by President Donald Trump.

The attorneys general, led by George Jepsen of Connecticut, said in a court filing Monday that they are seeking to intervene in the case, PHH Corp. v. CFPB, which found the agency's single-director structure is unconstitutional.

The attorneys general 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.

”There is reason to believe that the new administration will not maintain its defense of the CFPB," the attorneys general wrote in a 25-page filing in the U.S. Court of Appeals for the D.C. Circuit. "According to numerous media accounts, the Trump administration is planning to fire and replace the current director as soon as possible and take other steps that could directly impact how, and whether, this litigation proceeds."

If the PHH ruling were permitted to stand, the attorneys general said, it will undermine their power to protect consumers against abuse in the consumer finance industry.

"The CFPB is the cop on the beat, protecting Main Street from Wall Street misconduct," Jepsen said in a press release.

On Tuesday, Cordray sent his strongest signal yet that he has no intention of resigning ahead of his term's July 2018 expiration, even if Trump asks him to leave.

The attorneys general said the Trump administration might not mount a defense of Cordray and the "for cause" protection created by the Dodd-Frank Act.

In October, a three-judge appeals court panel ruled that a provision of Dodd-Frank allowing the CFPB's director to be removed only for cause was unconstitutional. The panel sought to strike that provision, allowing the president to remove the director at any time.

"A significant probability exists that the pending petition for rehearing will be withdrawn, or the case otherwise rendered moot, in a way that directly prejudices the interests of the state attorneys general and the citizens of the states that they represent," the attorneys general said in the filing.

"The panel's decision effectively rewrites the statute, permitting the immediate termination of the director at will," the filing stated. "This will not only compromise the independence of the agency, it will likely derail pending policy initiatives and enforcement actions and possibly call into question the validity of past initiatives."

The CFPB has appealed the panel's ruling, which has been stayed pending a possible en banc review by the D.C. Circuit.

The court considers four factors in granting an intervention, including the timing of the application, a legally protected interest in the case and whether the case threatens to impair that interest.

"The need for intervention only became apparent after the presidential election and indications from the incoming administration revealed that the continued defense of the statute might be ended," the attorneys general stated in the filing.

The 16 states whose attorneys general are seeking to intervene in the case are: Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont and Washington.

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Policymaking Richard Cordray CFPB