Government Affairs

New York Judge Revives U.S. CFPB Constitutionality Question

On 1 May 2018, the U.S. Consumer Financial Protection Bureau (CFPB) and PHH Mortgage let the filing deadline pass in which either party could petition the U.S. Supreme Court to review the final ruling of the U.S. Court of Appeals for the District of Columbia (D.C.) on their case. The lack of further action ended a long-going litigation.

An underlying question for the Court of Appeals was the constitutionality of the structure of the CFPB and that much of the power of the Bureau resides within its Director. The Court ultimately decided that the CFPB structure was constitutional, and the President could only remove the Director “for cause” as opposed to “at will.”

Related: Ruling Stands in PHH v. CFPB Mortgage Case

The CFPB and PHH therefore accepted the decision on the constitutionality of the Bureau as well as the other terms of the final opinion. However, the question of the constitutionality of the structure of the CFPB has been since revived.

On 21 June 2018, Senior Judge Loretta Preska of the U.S. District Court for the Southern District of New York issued a ruling that the structure of the CFPB is unconstitutional.


In the case of the CFPB v. RD Legal Funding LLC, the opinion of Judge Preska was in direct contrast to the ruling of the U.S. Court of Appeals for D.C. Judge Preska went even further than just taking issue with the authority of the Director and wrote that the entire section of the Dodd-Frank Act creating the Bureau should be stricken.

The ruling was in response to a motion to dismiss the case by the CFPB and State of New York. Judge Preska ruled that since the structure of the CFPB is unconstitutional, the CFPB had no standing to bring the suite. Judge Preska did allow the State of New York to proceed with the case which denies the CFPB the opportunity to appeal the ruling unless the States determines not to delay an appeal.

How This Impacts Mobility

The relocation of a transferee often involves the sale and/or purchase of a home and thus the policies and practices involving real estate directly impact Worldwide ERC® members. The CFPB Director has enormous powers with little oversight from Congress and thus the policy positions of a specific individual as director determines the direction of the Bureau. Under OMB Director Mulvaney, the CFPB has taken the position to enforce consumer protection laws but to not “push the envelope”.

Related: Mulvaney Continues to Shape U.S. CFPB

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