Did a change in leadership sway the decision?
Via The Hill:
A federal district judge ruled Thursday that the structure of the Consumer Financial Protection Bureau (CFPB) violates the Constitution, countering a January ruling from a federal appeals court.
Judge Loretta Preska of the Southern District of New York ruled that the CFPB’s creation as an independent agency with a director that could only be dismissed for wrongdoing was unconstitutional.
In January, the Court of Appeals for the District of Columbia Circuit ruled that the CFPB’s structure was constitutional, reversing a 2016 verdict issued by a panel of the court’s judges. The appeals court’s initial opinion, written by Judge Brett Kavanaugh, sought to fix the issue by ruling that the CFPB director could be fired at will.
Preska, an appointee of former President George H.W. Bush, concurred with part of the D.C. appellate court’s initial ruling against the CFPB, which held that the agency “is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director.”
She ruled that the entire section of the 2010 Dodd-Frank Act that established the CFPB should be stricken, and she dismissed the CFPB from the case, which was filed in May 2017 by then-New York Attorney General Eric Schneiderman (D). Preska did not issue an order to shut down the bureau.
Acting CFPB Director Mick Mulvaney last month sought to protect the agency’s involvement in its case against RD Legal Funding, which was initiated by his predecessor, Richard Cordray. The suit claims that RD Legal scammed both survivors of the 9/11 terrorist attacks and former NFL players battling the effects of severe concussions out of monetary compensation for their injuries.
While the CFPB is now dismissed from the lawsuit, Preska ruled that New York Attorney General Barbara Underwood (D), who replaced Schneiderman in May, could pursue the case against RD Legal under Dodd-Frank.
Thursday’s ruling raises the likelihood that the Supreme Court will take up the issue of the CFPB’s constitutionality in an upcoming term. The 5th Circuit Court of Appeals will also hear a challenge to the CFPB’s constitutionality, and a ruling against the bureau could force the high court to reconcile the conflicting opinions.
The CFPB was created by Dodd-Frank to crack down on predatory lending, enforce consumer protection laws and police the financial services industry against unfair, deceptive and abusive practices.
The bureau was designed and staffed primarily by Sen. Elizabeth Warren (D-Mass.) when she served as a special adviser to former President Obama before her 2012 election to the Senate.