Federal judge rules CFPB structure is unconstitutional

In February, the agency's constitutionality was upheld by a federal appeals court in Washington

Federal judge rules CFPB structure is unconstitutional

The likelihood that the US Supreme Court will have to rule on the question of the Consumer Financial Protection Bureau’s constitutionality has increased after a federal judge ruled in the negative, contradicting an earlier decision by a federal appeals court upholding the agency’s structure, according to a report by Reuters.

US District Judge Loretta Preska forbade the consumer watchdog from suing a company that advanced money to people awaiting settlement payouts, ruling that the agency’s structure was unconstitutional.

The ruling contradicts a February decision by a federal appeals court which found constitutional the bar against the president from firing the CFPB at will.

Preska’s ruling agreed with the dissenting opinion in that case, where one judge said it was unconstitutional for the agency to be led by a single director serving a five-year term who could not be fired by the president except for cause.

Reuters said that the latest ruling, if it is upheld by another appeals court, makes it more likely for the issue to reach the Supreme Court.

The ruling stems from a February 2017 lawsuit filed by the CFPB and the New York Attorney General against RD Legal Funding and related entities. The suit alleged that the companies scammed borrowers by employing deceptive tactics which resulted in victims paying double, or even more, of the amount they received upfront.

While the ruling prevents the CFPB from suing the companies, Preska said the New York Attorney General could still pursue the case.

 “We will continue to vigorously pursue our case against RD Legal for as many victims as possible,” said Amy Spitalnick, a spokeswoman for the attorney general’s office.

The CFPB declined to comment, according to Reuters.

“We are pleased that court correctly found that the CFPB is unconstitutional as structured, and this underscores that the CFPB never should have brought this action in the first place,” said David Willingham, counsel for RD Legal Funding.


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