A decision by a federal judge in New York could bring the constitutionality of the Consumer Financial Protection Bureau before the nation’s highest court.
U.S. District Judge Loretta A. Preska in Manhattan ruled Thursday that the structure of the CFPB is unconstitutional.
The decision from the U.S. District Court for the Southern District of New York was made in the case CFPB v. RD Legal Funding.
But the ruling conflicts with a decision in January from the U.S. Court of Appeals for the District of Columbia Circuit in PHH v. CFPB that the regulator is constitutional.
“In CFPB v. RD Legal Funding, Judge Preska adopts the legal position of Judge Kavanaugh, who wrote the 3-judge panel appellate decision and dissented in the en banc decision that upheld the constitutionality of the CFPB,” Joseph Lynyak III, a partner at Dorsey & Whitney, explained in a written statement. “Importantly, the court determined that it was improper to strike the ‘for cause’ language in Title X of Dodd-Frank, and rather, indicated that the entirety of Title X should be ‘struck in its entirety’ (due to the court’s determination that the presumption of severability was rebutted).”
Lynyak said that the decision might require that the Supreme Court review the conflicting decisions, “particularly since Judge Preska’s decision, if correct, arguably voids all CFPB actions taken to date. In the minimum, the CFPB will be forced to appeal Judge Preska’s decision.”
