*This post was originally published on creditclips.org.
by Adam Levitin, Professor of Law, Georgetown University Law Center
The headlines look pretty bad: the DC Circuit Court of Appeals held the CFPB’s structure to be unconstitutional in a case called PHH v. CFPB, which deals with kickbacks in captive private mortgage reinsurance arrangements allegedly in violation of the Real Estate Settlement Procedures Act. In fact, however, the ruling is a blessing in disguise for the CFPB. While the 110 page decision is filled with inflammatory rhetoric, it gives the CFPB’s detractors very little succor in the end. The CFPB lost on the decision’s rhetoric, but won on the practical implications. Although the CFPB’s current structure was declared unconstitutional, the court also immediately remedied the flaw by declaring that the CFPB Director is now removable by the President at will, rather than only "for cause" as provided for by the Dodd-Frank Act. There are four critical implications from this ruling:
· First, the CFPB’s existing rule makings and enforcement actions remain valid and unaffected. That is a huge win for the CFPB. It is business as usual at the CFPB for all intents and purposes.
· Second, the CFPB’s Director is now under direct Presidential political control, but that does not have partisan implications: a GOP-appointed director could be removed as easily by a Democratic president as a Democratic-appointed director could be removed by a Republican president. Now the CFPB Director, instead of running on a five-year term will be on a five-year term that might get curtailed with every change in Presidential administration. That is not a particularly big deal.