By Lisa Lambert
WASHINGTON (Reuters) - The U.S. watchdog for consumer finance scored a major victory last week when it was part of the government group that forced Wells Fargo & Co <WFC.N> into a $190 million settlement of fraud charges, but the Consumer Financial Protection Bureau still faces an ugly fight to justify its own existence.
The agency, which has taken on businesses ranging from small car dealers and major financial institutions, is at the center of a philosophical debate about the value and limits of regulation. Both presidential candidates have offered opinions on the five-year-old agency, and Republicans and Democrats have worked to rally public opinion against and for the agency, which was created in the 2010 Dodd-Frank Wall Street reform law in response to the widespread deception and abuse of borrowers that helped lead to the financial crisis.
The CFPB could lose its first battle as early as Friday, the earliest that a U.S. District Court could rule on whether the CFPB's single-director structure is unconstitutional. The lawsuit, brought by mortgage servicer PHH Corporation over a fine for allegedly taking kickbacks for referring customers to an insurance company, is the most serious legal test the agency has faced.
PHH contends that the CFPB's structure is unconstitutional because the agency's director is not directly answerable to the president or to Congress.
Should PHH prevail, the CFPB would likely appeal. But any ruling against the agency would give its critics - primarily regulated industries and Republicans on Capitol Hill - ammunition in the longer-term fight to dismantle or reorganize the agency.
In the meantime, lawmakers have been fighting the agency on two other fronts: power and money. On Tuesday, the House of Representative Financial Services Committee approved a bill that would cut the CFPB's powers and require that its funding from the Federal Reserve be made dependent on the more typical Congressional appropriations process. Democrats argued doing that would wipe out the agency's ability to go after financial wrongdoers, which is its main reason for existing.
And in the days after the Wells Fargo settlement, Republican Speaker of the House Paul Ryan repeated his calls for a reorganization of the agency and tweeted: "The #CFPB supposedly exists to protect you, but instead it tries to micro manage your everyday life."
STUMP SPEECH STAPLE
Any real change to the activist agency will not likely come until after the November elections. The CFPB, which has taken on (and drawn opposition from) the payday lending and debt collection industries, was originally championed by Senator Elizabeth Warren, who is now stumping for Democratic presidential nominee Hillary Clinton.