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Justice Department files brief saying consumer watchdog agency's structure is unconstitutional

Consumer Financial Protection Bureau Director Richard Cordray.
Bill Clark | CQ Roll Call | Getty Images
Consumer Financial Protection Bureau Director Richard Cordray.

The Justice Department filed a brief on Friday in a lawsuit against the Consumer Financial Protection Bureau, arguing that the consumer watchdog agency's structure is unconstitutional.

In the lawsuit, PHH argues that the CFPB's structure gives it too much power.

In its brief, the Justice Department argued that the president should be able to remove the CFPB director at will. Currently the head of the CFPB can only be removed in cases of "inefficiency, neglect of duty or malfeasance in office," as stated in the Dodd-Frank Act.

The CFPB declined to comment to CNBC.

The agency was a key component of Barack Obama's financial reforms and Wall Street regulations set in place in the wake of the financial crisis.

Because the CFPB's single director structure runs the risk of engaging in "extreme departures from the president's executive policy," the Justice Department argued. It claimed that an agency run by a single person is "unchecked by the constraints of group decision-making among members appointed by different presidents."

Supporters of the agency argue that its current structure protects the independence of the CFPB. Richard Cordray, director of the CFPB, told CNBC earlier this month that parrying attempts by the Donald Trump administration to remove him from his post is important.

"I think that the independence of a consumer watchdog is very much worth fighting for. It's really important work," Cordray said.