Federal Court Declares CFPB Structure Is Unconstitutional
The future of the Consumer Financial Protection Bureau (CFPB) took a surprise turn when a federal judge overturned a January ruling from a federal appeals court and declared the agency’s structure is unconstitutional.
The ruling came about in a lawsuit brought by the CFPB during Richard Cordray’s directorship in conjunction with New York Attorney General Eric Schneiderman against RD Legal Funding, which was accused of scamming survivors of the 9/11 terrorist attacks and former National Football League players with severe concussions. RD Legal Funding questioned the CFPB’s constitutionality in its defense, and Judge Loretta Preska of the Southern District of New York ruled that the CFPB’s existence as an independent agency with a director who could only be removed from leadership by the president for wrongdoing ran afoul of the constitution.
Judge Preska ordered the CFPB dropped from the lawsuit against RD Legal Funding. Schneiderman resigned as attorney general of New York in May following a sexual harassment scandal and the judge stated his successor, Barbara Underwood, is able to pursue the lawsuit against RD Legal Funding.
The CFPB did not comment on the ruling. Richard Hunt, President and CEO of the Consumer Bankers of America, welcomed the decision.
“The court’s ruling further proves one person should not have the sole authority over the financial lives of every American consumer," said Hunt. "It creates uncertainty, limits opinions and turns the Bureau into a political pendulum, swinging with each new Administration."