The Next President Might Be Able to Fire One of Our Most Important Consumer Watchdogs for Any Reason

Director of the Consumer Financial Protection Bureau Richard Cordray speaks at a public meeting of the Financial Literacy and Education Commission on June 29 in Washington.

Pete Marovich/Getty Images

Thanks to a federal circuit court ruling Tuesday morning, the president will be able to remove the head of the Consumer Financial Protection Bureau, the agency charged with curbing abuse in the financial sector, for any reason. And the image of Donald Trump yelling, “You’re fired” at the head of the CFPB is only one reason to be upset by this.

Up until now, the president could only replace the CFPB head during his or her term for cause. As envisioned by Dodd-Frank, the 2010 legislation that set the agency up, this was to shield the CFPB from political pressures.

But a three-judge panel—all Republican appointees, by the way—says this setup violates the Constitution, because, they argue, it leaves the head of the agency all but unaccountable.

Conservatives have had their sights set on the CFPB pretty much from the day now-Sen. Elizabeth Warren first conceived it. There have been numerous bills in Congress that would put the CFPB on a shorter leash by exerting more control over its budget, appointments, or fines. Some would end its existence entirely, like one sponsored by Sen. Ted Cruz, who said earlier this summer, “Don’t let the name fool you. The Consumer Financial Protection Bureau does little to protect consumers,” adding that he would like to “free consumers and small businesses from the CFPB’s regulatory blockades.”

No doubt the millions of consumers who had accounts opened in their name without permission by Wells Fargo employees would beg to differ. Tuesday’s decision comes barely a month after the CFPB—in conjunction with the Office of the Comptroller of the Currency and the Los Angeles City Attorney’s office—issued a record-breaking fine against the bank, turning a little-known but important case into a national scandal.

And, yes, whaddaya know, the case at issue against the CFPB was filed by an unhappy financial services company, mortgage provider PHH Corp., after the agency slammed it with a $109 million fine for taking money from insurers and in turn recommending them to customers, something that happens to be against the law.

Conservatives celebrated on Twitter on Tuesday. “The Core of Obama’s attempted takeover over of the financial sector ruled unconstitutional,” Tom Fitton, the president of Judicial Watch tweeted.

But it’s worth noting that even when the president and the head of the CFPB hail from the same political party, disagreements can happen. And no, it’s not always a case of Democrats good, Republicans bad.

This is very clear if you look at the CFPB’s ongoing efforts to rein in the payday-loan industry. The former head of the Democratic National Committee, Rep. Debbie Wasserman Schultz, attempted to undercut the CFPB by supporting legislation that would have delayed any agency payday loan regulations for two years. The bill she promoted also would have, at least in some cases, permitted weaker state regulations to supersede the CFPB’s final rules. She only backed down late this spring in the face of both sustained pressure from the more progressive wing of the party and a statement from Hillary Clinton in support of the CFPB’s actions in the area. The more the CFPB is insulated from politics, the better.

The current legal dispute could have ended worse. PHH Corp. wanted courts to dismantle the CFPB entirely. That didn’t happen. But that’s a minor comfort to agency supporters. “Today’s court ruling on @CFPB is a gift to #WallStreet, predatory lenders and big banks,” tweeted Liz Rose, a spokeswoman for the left wing Economic Policy Institute.

The CFPB will likely appeal. The first step would likely be the full circuit court. From there, one side or another will almost certainly attempt to take it to the Supreme Court, which is currently … oh, do I really need to tell you?

And so it’s possible that the relationship between the Oval Office and the CFPB, which is supposed to protect little guys from big guys, just changed for good. Think about that.