Democratic state officials rush to defend U.S. consumer agency

By Lawrence Hurley

WASHINGTON, Jan 23 (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 last October ruled that the structure of the agency charged with guarding consumer finances was unconstitutional.

The state officials said in the court filing that they are concerned that the Trump administration will fire the independent director of the agency, Richard Cordray, who was appointed by Democratic former President Barack Obama. The agency was set up during Obama's presidency as part of the 2010 Dodd-Frank Wall Street reform law.

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

The state officials asked to be able to defend the agency in the legal challenge brought by mortgage lender PHH Corp and ensure that the case is not declared moot if the Trump administration decides to drop the appeal of the ruling.

Under the 2010 law, the director can be fired only "for cause," limiting the ability of a president to remove him.

But in the October ruling, the U.S. Court of Appeals for the District of Columbia Circuit said that restriction was an unlawful limitation on presidential power.

The agency, with Obama still in office, immediately sought a rehearing. The court has not yet said whether it will reconsider the ruling.

(Reporting by Lawrence Hurley; Editing by Will Dunham)