11 States Join Supreme Court Challenge to CFPB’s Core Structure

A coalition of 11 state attorneys general have joined a complaint challenging the core structure of the Consumer Financial Protection Bureau (CFPB), arguing that its leadership structure is unconstitutional. This is according to a brief filed with the United States Supreme Court which was obtained by RMD.

The coalition of states – Texas, Arkansas, Indiana, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, South Carolina, Utah, and West Virginia – is motivated to participate due to their contention that the enforcement authority and director structure of the Bureau encroaches on the states’ own abilities to enforce its own consumer protection laws, according to the brief.

“If Congress wishes to permit federal agencies to assist or preempt States in protecting consumers, it must do so in a manner consistent with Article II of the Constitution,” the brief reads in part. “The CFPB’s structure violates the Constitution whether its director was (at any given point) temporary or permanent. The CFPB thus had no authority to bring or to continue the enforcement action.”

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The enforcement action the brief is referring to centers on a company called All American Check Cashing, Inc., in which the CFPB alleged abusive or deceptive practices stemming from its check-cashing services.

A core issue of the CFPB’s alleged unconstitutionality rests in the powers granted to the Bureau’s Director by the law that established the agency in the first place. Under the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act that helped establish the CFPB, the President of the United States is not permitted to dismiss an appointed and confirmed CFPB Director except for “inefficiency, neglect of duty, or malfeasance in office,” the law says.

Officials from the Trump Administration have already recommended that the highest court in the country take on the case of Selia Law v. CFPB, a case that similarly takes aim at the constitutionality of the agency. That suit is scheduled to be heard by the Court in early 2020, and was brought by a law firm which provides a number of legal services to clients including debt relief. The Bureau is investigating Seila Law, attempting to determine if it has violated the Telemarketing Sales Rule in accordance with its debt-related services.

Changing the structure of the CFPB could make the agency more malleable to ever-changing political headwinds, according to Mark Dabertin, an attorney in law firm Pepper Hamilton’s Financial Services Practice Group.

“This structure allows the incumbent Director to exercise a degree of independence that would be lost if the president could replace the Director at will,” Dabertin told RMD in September. “If the latter were to occur, the CFPB would likely be viewed as purely political and its actions would constantly be at risk of being undone.”

Read the full brief at the U.S. Supreme Court.

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