Ohio’s Richard Cordray loses power as consumer agency director

A federal appeals court Tuesday ruled that the structure of a consumer agency headed by former Ohio Attorney General Richard Cordray is unconstitutional because the president of the United States has limited power to dismiss the director.

The ruling by a three-judge panel in Washington allows the Consumer Financial Protection Bureau to continue its operations as an independent consumer watchdog over financial institutions.

But the ruling chips away at Cordray’s authority at an agency fiercely opposed by the financial industry and conservatives on Capitol Hill. Should the ruling stand and if Republican Donald Trump is elected president, Trump could fire Cordray, who has handpicked for the job by President Barack Obama.

In sharp language, Judge Brett Kavanaugh wrote Congress ignored the Constitution and tradition by placing the authority to run the agency in the hands of one person as opposed to a multi-member commission, similar to independent agencies like the Federal Communications Commission.

Kavanaugh wrote that the agency’s “concentration of enormous executive power in a single, unaccountable, unchecked director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision-making and abuse of power … than does a multi-member independent agency.”

“The multi-member structure reduces the risk of arbitrary decision-making and abuse of power and thereby helps protect individual liberty,” he wrote.

Kavanaugh rejected a chance to close the agency, but instead ruled that the president would have the power to dismiss Cordray in the same way a cabinet member can be fired. Under the 2010 financial regulation law which established the agency, Cordray can only lose his job for what is known as cause, such as neglecting his work.

The Senate confirmed Cordray to a five-year term in 2013 with both Sen. Sherrod Brown, D-Ohio, and Sen. Rob Portman, R-Ohio, voting in favor his nomination. Senate Republicans, however, had pushed for the agency to be directed by a five-member board instead of a single director.

Cordray is considered a potential Democratic gubernatorial candidate in Ohio in 2018. A spokeswoman for the agency said bureau officials are considering an appeal, adding that as “the court expressly recognized, the bureau will continue its important work.”

(Jessica Wehrman of the Washington Bureau contributed to this story.)

About the Author