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A federal court’s decision last week to make the director of the Consumer Financial Protection Bureau report to the president sounded alarm bells in Washington, D.C.’s business and legal community, MorningConsult.com reported yesterday. Financial professionals say that the decision will likely have two major effects on CFPB operations: First, the agency’s prioritization of rules and enforcement actions could change because they fear a court’s reprisal. Second, the next president could opt to terminate the current director, Richard Cordray. A panel of three judges on the U.S. Court of Appeals for the District of Columbia circuit ruled in PHH Corp. vs. CFPB that the 2010 Dodd-Frank Act crafted the director’s position in a manner that consolidated too much power at the top. Judge Brett Kavanaugh, who authored the majority opinion, argued that the CFPB’s director has more power than virtually any other government official, save the president. To remedy this, Kavanaugh ruled that the director must report to the president. The agency’s Republican opponents viewed the ruling as a victory for their efforts to overhaul the CFPB, and Democrats largely brushed off the decision as a minor setback.

Wells Fargo announced yesterday that its longtime chief executive and chairman, John G. Stumpf, is stepping down, the latest turn for the embattled megabank after it admitted that thousands of low-level employees had set up sham accounts to meet sales quotas, the Washington Post reported today. The San Francisco-based bank has repeatedly apologized and said that it had fired 5,300 employees for misconduct and put in place more stringent internal controls. But that has not been enough for regulators and lawmakers, including Sen. Elizabeth Warren (D-Mass.), who called on him to resign. Stumpf went as far as pledging to give up $41 million in compensation to account for the scandal, but his overture did little to quiet critics. Tim Sloan, another long-time Wells Fargo executive, will take over Stumpf’s duties as CEO. A board member, Stephen Sanger, will now serve as chairman, effectively dividing power that had previously been consolidated under Stumpf. Sanger is the former chief executive of General Mills.

A federal appeals court ruled yesterday that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional, fueling an election-year political fight over one of the signature government responses to the 2007-09 financial crisis, Reuters reported. The U.S. Court of Appeals for the District of Columbia Circuit threw out a $109 million penalty against PHH Corp in 2014, saying that the structure of the CFPB gives its sole director too much power. The three-judge panel, though, also sought to remedy the problem by giving the president the power to fire the director, which it said made the position similar to the Attorney General and other constitutionally sanctioned agency heads who answer to the White House. The CFPB is expected to request the entire appeals court conduct an "en banc" review of the case. The losing side will likely appeal to the Supreme Court. The ruling will affect other lawsuits against the agency in lower courts, but should not affect the government's $190 million settlement last month of fraud charges with Wells Fargo & Co. The CFPB was involved in that case.

Wells Fargo, under fire from all sides because of a scandal in which employees set up illegal accounts to meet sales quotas, announced a restructuring of its top management yesterday, solidifying the leadership structure beneath Timothy J. Sloan, who is widely expected to succeed John G. Stumpf, the bank’s embattled chairman and chief executive, the New York Times reported today. The changes, to take effect on Nov. 1, will place a number of top executives directly under the purview of Sloan, a 29-year company veteran who was promoted last November to Wells Fargo’s No. 2 spot, becoming the bank’s president and chief operating officer. Sloan, who has been head of Wells Fargo’s wholesale banking division — which does business with companies and organizations, not personal account holders — has been largely insulated from the scandal engulfing the company’s retail banking group. That division has been in crisis mode since Wells Fargo agreed last month to pay $185 million in penalties for fraudulently opening as many as two million bank and credit card accounts that may not have been authorized by customers. Read more. 

In related news, Wells Fargo & Co. managers pushed bankers to sign up customers for potentially costly overdraft protection that they didn’t always need or realize they were getting, according to current and former bankers and managers, the Wall Street Journal reported today. Members of Congress expressed concern about potential overdraft problems at the bank during two hearings last month with Wells Fargo Chief Executive John Stumpf. He was called to Capitol Hill after the bank in September agreed to a $185 million fine and enforcement action over what the Consumer Financial Protection Bureau called the “widespread illegal practice” of opening unauthorized accounts. The CFPB is also reviewing overdraft-fee practices broadly at banks, the agency has said. Read more. (Subscription required.) 

The Obama administration’s crackdown on payday lending to low-income borrowers has generated unusually heavy public feedback, stoked by computer-generated comments and the escalating ideological battle over consumer financial issues, the Wall Street Journal reported today. The Consumer Financial Protection Bureau (CFPB) has received about a million public comments on rules governing payday lenders since issuing the proposal in June. That figure is the highest in the agency’s five-year history, far exceeding the 50,000 received on a May proposal restricting mandatory arbitration agreements and giving consumers more power to sue financial firms. Advocates say the use of software that prewrites comments for people to submit electronically has helped fuel the outcry. The payday-lending rule is the federal government’s first comprehensive effort to regulate small-dollar, nonbank lenders that often charge triple-digit interest rates and cater to about 12 million Americans. The proposal asks lenders to go through the process of verifying that consumers can pay back those loans before extending the credit, a requirement that advocates say will help keep borrowers from falling into cycles of debt.

Consumer delinquencies fell last quarter to their lowest point in at least 15 years, according to data released yesterday by the American Bankers Association, NationalMortgageNews.com reported. The percentage of overdue closed-end loans was 1.35 percent in the second quarter, down three basis points from the first quarter. The ABA's composite ratio tracks delinquencies in eight closed-end installment loan categories including personal, home equity and direct auto loans. It defines a delinquency as a payment that is 30 days or more overdue. The latest figure was the lowest since at least 2001, and it marked nearly four years of delinquencies below the 15-year average of 2.21 percent. A big reason for the latest decline was the 30-day delinquency rate on home equity loans, which dipped four basis points from the first quarter to 2.70 percent.

Personal consumption was unchanged in August from a month earlier, the Commerce Department said on Friday, the Wall Street Journal reported on Friday. That was the weakest reading since March. Consumer spending has been the main driver of economic growth in recent years. During the second quarter, it advanced at the fastest rate since the end of 2014. Americans also saved a little more in August, Friday’s report showed. The personal saving rate rose to 5.7 percent last month from 5.6 percent in July, though it remains below levels seen at the start of 2016.