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Democratic-led states battle Trump over consumer financial agency

By Lawrence Hurley

WASHINGTON (Reuters) - Democratic state officials took a step on Monday to try to defend the U.S. Consumer Financial Protection Bureau in a court battle that could defang it, worried that Republican President Donald Trump's administration will not safeguard the agency.

Attorneys general from 16 states plus the District of Columbia filed papers with a federal appeals court seeking to intervene in the case. That court ruled last October that the structure of the agency, charged with guarding consumer finances, was unconstitutional.

The agency immediately asked the court to reconsider its decision but the Trump administration could drop the appeal.

The state officials, led by Connecticut Attorney General George Jepsen, said in the court filing they are concerned the Trump administration will fire the agency's independent director, Richard Cordray, who was appointed by Democratic former President Barack Obama. The agency was created during Obama's presidency in the 2010 Dodd-Frank Wall Street reform law.

"It's very much in our wheelhouse to be protecting consumers. The whole thrust of the creation of the CFPB is to protect consumers," Jepsen said in an interview.

"We are concerned that this law is going to be gutted," Jepsen added.

The new court filing was an early salvo in what could become a lengthy legal fight between the Trump administration and Democratic state officials. If the administration follows through on campaign promises on other issues such as climate policy and immigration, "that would put us on a course of conflict on a wide variety of areas," Jepsen said.

The court filing said Trump "has expressed strong opposition to the Dodd-Frank reforms" and that "it is urgent that the state attorneys general intervene in order to protect the interests of their states."

The state officials asked to be able to defend the agency in the lawsuit brought by mortgage lender PHH Corp and ensure the case is not declared moot if Trump's administration drops the appeal of the ruling.

Under the 2010 law, the director can be fired only "for cause," limiting a president's ability to remove him. The U.S. Court of Appeals for the District of Columbia Circuit ruled that this restriction was an unlawful limitation on presidential power.

Democratic state officials are expected to be joined by left-leaning advocacy groups in legal actions against the Trump administration. Republican-governed states and conservative groups filed numerous lawsuits against the Obama administration.

The American Civil Liberties Union and Citizens for Responsibility and Ethics in Washington already have filed legal actions involving Trump.

(Reporting by Lawrence Hurley; Editing by Will Dunham)