US court rules CFPB structure unconstitutional but can continue operating

Director Richard Cordray of the Consumer Financial Protection Bureau testifies about the unauthorized opening of accounts by Wells Fargo during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington, DC, September 20, 2016.
Saul Loeb | AFP | Getty Images

A U.S. appeals court on Tuesday ruled that the U.S. Consumer Financial Protection Bureau is unconstitutional because too much power is vested in the regulator's sole director, but that it can continue operating with the director removable by the president.

The U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of lender PHH Corp. in its challenge to the financial watchdog created by the 2010 Dodd-Frank financial reform act, and threw out the $109 million penalty imposed on the company.

PHH objected after the agency in January 2014 accused the lender of referring customers to mortgage insurers who in turn bought reinsurance from a PHH unit. The bureau cast the reinsurance payments as improper kickbacks and imposed a $109 million penalty against PHH in June.