- Us District Court in New York Rules that the Cfpb is Unconstitutional
- September 7, 2018
On June 21, 2018 a federal judge in the US District Court for the Southern District of New York issued a ruling finding that the Consumer Financial Protection Bureau (“CFPB”) was unconstitutionally structured and that the federal agency should be eliminated.
The ruling (written by Chief Judge Loretta A. Preska – appointed to the federal bench by President George H.W. Bush) was issued in the case of CFPB v. RD Legal Funding (Case No. 1:17-cv-00890). The CFPB had brought the action against RD Legal in 2017 alleging the company had “scammed” retired NFL players and 9/11 first responders in connection with anticipated monetary settlements. The legal action was also being prosecuted by the New York State Attorney General.
Finding in favor of RD Legal, Judge Preska ruled that because the CFPB structure was unconstitutional, it lacked the authority to bring the action against RD Legal. The Court specifically found that a prior federal appellate decision (PHH Corp. v. CFPB – which did not find the CFPB unconstitutional) was not binding in New York.
Instead, Judge Preska respectfully disagreed with the PHH ruling and adopted the PHH Dissent (written by Judge Brett Kavanaugh – D.C. Federal Circuit) ruling that based upon considerations of history, liberty, and presidential authority, the CFPB was unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director. While PHH resolved this issue by making the CFPB Director an “at will” employee removable at the President’s discretion, Judge Preska found the entire CFPB was unconstitutional.Our office will be monitoring developments in this case and will provide updates as they occur. Please contact us if you would like to discuss this new case.