A federal judge in Florida has opened an opportunity for the U.S. Justice Department to undercut the Consumer Financial Protection Bureau in one of its biggest cases, teeing up a new fight as the Trump administration and Republicans in Congress ramp up their own attacks against the Obama-era agency.
The CFPB sued Ocwen Financial Corp. in April, alleging the West Palm Beach-based company “has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process.” This week, U.S. District Judge Kenneth Marra of the Southern District of Florida approved Ocwen’s motion to invite the Justice Department to share its view—crafted under the leadership of U.S. Attorney General Jeff Sessions—that the CFPB’s structure is unconstitutional.
The dispute will mark the latest example of two federal agencies clashing in court. The Justice Department last month, staking a position against the U.S. Equal Employment Opportunity Commission, said sexual orientation is not protected under federal civil rights laws. In the U.S. Supreme Court, the Justice Department reversed course to argue against the lawfulness of employment contracts that ban class actions.
The Justice Department’s criticism of the CFPB is well-known. In March, the government abandoned its earlier defense of the CFPB and adopted the position that the bureau’s single-director design “lacks those critical structural attributes that have been thought to justify ‘independent’ status for multi-member regulatory commissions.”
That new position set the stage for a remarkable hearing in May before an en banc panel of the U.S. Court of Appeals for the D.C. Circuit. The Justice Department and CFPB argued on opposite sides in the case PHH v. CFPB, a dispute that challenges the bureau’s constitutionality. The appeals court is expected to issue a ruling later this year.
Lawyers for Ocwen—represented by Greenberg Traurig, Goodwin Procter and BuckleySandler—have mounted a similar attack on the CFPB, and they want the Justice Department to weigh in on their side. Many companies have piled on to the argument that the CFPB is unlawfully structured and its enforcement actions therefore should be voided.
The CFPB’s adversaries extend beyond the courts. The U.S. Treasury Department released a report in June that called for empowering the president to readily fire the CFPB director. On Capitol Hill, U.S. House Republicans have passed legislation that would enact such a change to the bureau’s power structure.
Marra gave the Justice Department an Oct. 2 deadline to weigh in, with a response due from the CFPB on Oct. 16.