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The CFPB isn’t getting any love from the DOJ in lawsuit with PHH

(NEWS) The CFPB is getting sued and the DOJ has decided they won’t be helping the consumer watchdog agency win.

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CFPB vs DOJ

The Department of Justice (DOJ) on Friday filed their long awaited brief in the Consumer Finance Protection Bureau (CFPB) vs PHH Corporation case. The motion pits the DOJ against the consumer watchdog agency.

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What beef could the DOJ possible have with an agency dedicated to protecting consumers? The debate all comes down to the CFPB’s unique structure, which the DOJ argues is unconstitutional.

Sovereign or nah?

“The Department of Justice argues that an independent agency with one sole individual at its head who can only be removed for cause is unconstitutional—and the exception permitted by the Supreme Court for independent agencies with a commission form of governance should not be extended to agencies with only one agency head,” explains Joseph Lynyak III, a partner at Dorsey & Whitney International Law Firm and one of the nation’s leading experts when it comes to the CFPB.

Essentially, the DOJ is arguing against the CFPB’s sovereignty.

According to the DOJ, the executive branch can’t effectively check the CFPB’s powers due to a “for cause” removal provision. This provision, only allows the CFPB’s director to be removed for “inefficiency, neglect of duty or malfeasance of office.”

The “for cause” clause

This “for cause” provision has been a major source of contention for the CFPB.

Last October, the the U.S. Court of Appeals for the Washington, D.C. Circuit struck down the clause.

With Friday’s motion, the DOJ has sided with the appeals court in favor of removing the clause and allowing the president to remove the CFPB’s director at will.

The real remedy

CFPB supporters may see this as a major blow to the agency. Others see striking down the “for cause” provision as a shortsighted, limited solution.

In fact, PHH, the mortgage lender that started it all by challenging the CFPB’s constitutionality wants the agency completely dissolved.

However, history shows that the courts are not willing to go down that route. “Unlike the legal position taken by PHH (which strongly argues that nothing can correct the constitutional defects inherent in the structure of the CFPB), the Department of Justice argues in its brief that the remedy adopted by the three-judge panel (i.e., striking the “for cause” provision and allowing the president to fire the Director of the CFPB without cause) is correct.

Importantly, this remedy was the focal point of a Supreme Court case written by the Chief Justice in 2010,” Lynyak points out. Lynyak is referring to 2010’s Free Enterprise Fund v. Public Company Accounting Oversight Board ruling. In that case, the court also struck down the “for cause” provision.

Constitutionality

“In addition, while the DOJ concedes that the PHH case could be decided without addressing the constitutional issues, it correctly indicates that at some point in the immediate future the constitutionality of the CFPB will have to be addressed,” adds Lynyak.

This may eventually leave the CFPB’s future in the hands of the nation’s highest court.

“Whether the determination is made in this case or another case, eventually an inferior court will issue a decision adverse to the CFPB that will force the U.S. Supreme Court to take up the case,” Lynyak tells Bloomberg Law.

It could go all the way

It’s hard to predict whether this case will go all the way to U.S. Supreme Court.

What we do know is that the court’s ruling could have a major effect on any business offering financial services.

A rehearing is scheduled for May 24. If the court upholds their decision to get rid of the “for cause” provision, President Trump can dismiss the CFPB’s current director, Richard Cordray. Trump could then replace Cordray with a director he deems more business friendly.

Consistent in its inconsistency

Regardless of who takes the director role, the financial services industry should be open to both the pros and cons of allowing the CFPB’s director to be replaced at will by the president.

A business friendly director appointed by one president, can just as easily be replaced by the next administration.Click To Tweet

The cost of an inconsistent CFPB can’t be overlooked in the push to reform the troubled agency.

#CFPB

Staff Writer, Arra Dacquel is a San Francisco based writer. She has a bachelor’s degree in political science from UC Davis and is currently studying web development. She’s obsessed with tech news and corgis, but not in that order.

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Business News

Keep your company’s operations lean by following these proven strategies

(BUSINESS) Keeping your operations lean means more than saving money, it means accomplishing more in less time.

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The past two years have been challenging, not just economically, but also politically and socially as well. While it would be nice to think that things are looking up, in reality, the problems never end. Taking a minimalist approach to your business, AKA keeping it lean, can help you weather the future to be more successful.

Here are some tips to help you trim the fat without putting profits above people.

Automate processes

Artificial intelligence frees up human resources. AI can manage many routine elements of your business, giving your team time to focus on important tasks that can’t be delegated to machines. This challenges your top performers to function at higher levels, which can only benefit your business.

Consider remote working

Whether you rent or own your property, it’s expensive to keep an office open. As we learned in the pandemic, many jobs can be done just as effectively from home as the workplace. Going remote can save you money, even if you help your team outfit their home office for safety and efficiency.

In today’s world, many are opting to completely shutter office doors, but you may be able to save money by using less space or renting out some of your office space.

Review your systems to find the fat

As your business grows (or downsizes), your systems need to change to fit how you work. Are there places where you can save money? If you’re ordering more, you may be able to ask vendors for discounts. Look for ways to bring down costs.

Talk to your team about where their workflow suffers and find solutions. An annual review through your budget with an eye on saving money can help you find those wasted dollars.

Find the balance

Operating lean doesn’t mean just saving money. It can also mean that you look at your time when deciding to pay for services. The point is to be as efficient as possible with your resources and systems, while maintaining customer service and safety. When you operate in a lean way, it sets your business up for success.

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Business News

How to apply to be on a Board of Directors

(BUSINESS) What do you need to think about and explore if you want to apply for a Board of Directors? Here’s a quick rundown of what, why, and when.

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What?
What does a Board of Directors do? Investopedia explains “A board of directors (B of D) is an elected group of individuals that represent shareholders. The board is a governing body that typically meets at regular intervals to set policies for corporate management and oversight. Every public company must have a board of directors. Some private and nonprofit organizations also have a board of directors.”

Why?
It is time to have a diverse representation of thoughts, values and insights from intelligently minded people that can give you the intel you need to move forward – as they don’t have quite the same vested interests as you.

We have become the nation that works like a machine. Day in and day out we are consumed by our work (and have easy access to it with our smartphones). We do volunteer and participate in extra-curricular activities, but it’s possible that many of us have never understood or considered joining a Board of Directors. There’s a new wave of Gen Xers and Millennials that have plenty of years of life and work experience + insights that this might be the time to resurrect (or invigorate) interest.

Harvard Business Review shared a great article about identifying the FIVE key areas you would want to consider growing your knowledge if you want to join a board:

1. Financial – You need to be able to speak in numbers.
2. Strategic – You want to be able to speak to how to be strategic even if you know the numbers.
3. Relational – This is where communication is key – understanding what you want to share with others and what they are sharing with you. This is very different than being on the Operational side of things.
4. Role – You must be able to be clear and add value in your time allotted – and know where you especially add value from your skills, experiences and strengths.
5. Cultural – You must contribute the feeling that Executives can come forward to seek advice even if things aren’t going well and create that culture of collaboration.

As Charlotte Valeur, a Danish-born former investment banker who has chaired three international companies and now leads the UK’s Institute of Directors, says, “We need to help new participants from under-represented groups to develop the confidence of working on boards and to come to know that” – while boardroom capital does take effort to build – “this is not rocket science.

When?
NOW! The time is now for all of us to get involved in helping to create a brighter future for organizations and businesses that we care about (including if they are our own business – you may want to create a Board of Directors).

The Harvard Business Review gave great explanations of the need to diversify those that have been on the Boards to continue to strive to better represent our population as a whole. Are you ready to take on this challenge? We need you.

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Business News

Average age of successful startup founders is 45, but stop stereotyping

(BUSINESS) Our culture glorifies (yet condemns?) startup founders as rich 20-somethings in hoodies, but some are a totally different type.

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There’s a common misconception that startups are riddled with semi-nerdy, 20-something white dudes who do nothing but sip Nitro Brews and walk around the open office showing off the hoodie they wore yesterday. It turns out that it’s extremely rare that startup offices resemble The Social Network.

However, the academic backdrop for the real social network story (AKA Harvard), produced statistics that will serve to put the aforementioned misconception to rest. According to the Harvard Business Review, the average age of people who founded the highest-growth startups is 45. Say what?! A full-fledged adult?!

In fact, aside from the age category of 60 and over, ages 29 and younger were the smallest group of founders that are responsible for heading the highest-growth startups. I guess you can accomplish a lot when you’re not riding around the office on a scooter all day.

The study also found that older entrepreneurs are more likely to succeed. The probability of extreme startup success rises with age, at least until the late 50s. It was found that work experience plays an important role.

Many will argue, “Well, what about someone like Steve Jobs?” You could easily argue right back that it took Jobs until the age of 52 to create Apple’s most profitable product – the iPhone.

The study continues to answer questions like, why do Venture Capitalist investors bet on young founders? This goes back to the misconception at the start, and there’s a notion that youth is the key for successful entrepreneurship. Wrong.

There is also the idea that younger entrepreneurs are likely working with less financial options, so it may be common for them to take something from a VC at a lower price. As a result, they could be viewed as more of a bargain than older founders.

“The next step for researchers is to explore what exactly explains the advantage of middle-aged founders,” writes Pierre Azoulay, et al. “For example, is it due to greater access to financial resources, deeper social networks, or certain forms of experience? In the meantime, it appears that advancing age is a powerful feature, not a bug, for starting the most successful firms.”

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