Uncertainty Remains Over Trump Authority to Remove CFPB Director

Significant uncertainty remains around the future of Richard Cordray as the director of the Consumer Financial Protection Bureau (CFPB). Given the intense opposition Cordray and the agency have faced from Republicans in Congress, many expect that once in office, President-elect Donald Trump would seek to remove him as director. However it is not entirely clear what authority Trump will have to do so.

This legal uncertainty is the result of a pending appeal by the CFPB, challenging a federal court decision made earlier this year. The court’s decision ruled that the President has the authority to remove the agency’s director at will. Previously it was understood that the CFPB director could only be fired “for cause.”

A recent article in American Banker points out several legal avenues the Trump Administration might take, if he does seek to remove Cordray. One is simply “fire Cordray outright by asserting that he does not believe there is a limit to a president's removal authority.” The Administration could also attempt to remove Cordray “for cause”, an approach which uses the President’s existing authority, regardless of the outcome of the CFPB’s appeal. J.W. Verret, an associate law professor at George Mason University School of Law, suggests some reasons Cordray might be removed could include “allegations of employee discrimination and retaliation at the CFPB, and a settlement with auto lender Ally Financial that some allege was a false claim.”

In either instance, Cordray could challenge the Administration’s decision in court. Doing so, however, would present added legal and political risks for the agency, at a time when it faces an unfavorable political landscape. On December 7th, several banking trades released a joint letter urging the next congress to “pass legislation that will create a five-person, bipartisan board to govern the ... CFPB,” and calling the replacement of the independent director with a bipartisan board a “commonsense regulatory improvement.”

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