CFPB Arguing That Unconstitutional Structure Shouldn’t Invalidate Old Decisions

The Consumer Financial Protection Bureau is asking at least three federal courts to affirm decisions the agency has made, even though the U.S. Supreme Court ruled earlier this summer that the structure of the agency was unconstitutional.

The agency said if federal courts do not affirm those decisions, doubts could be raised about all of the actions the CFPB has taken since it was created in the Dodd-Frank Act that passed in 2010.

Earlier this summer, the Supreme Court ruled that because the agency’s director could only be removed for cause, the structure of the bureau was unconstitutional.

Following the ruling, Director Kathleen Kraninger issued a statement ratifying the agency’s decisions since it was created. She said she was issuing the statement to address any questions about the legitimacy of the agency decisions in light of the Supreme Court ruling.

That is not good enough for some companies that the agency has taken action against, including Seila Law. It was in that case that the structure of the CFPB was found unconstitutional by the Supreme Court. The Supreme Court did not rule on other parts of the case, only on the structure of the CFPB. Seila Law wants the CFPB’s actions against it voided and the Supreme Court did not do that.

In February 2017, the CFPB issued a Civil Investigative Demand to the law firm as part of a probe into the firm’s nationwide debt relief business. The agency said the business deceived financially vulnerable people and cost them millions of dollars in illegal fees.

Seila Law is asking the U.S. Circuit Court of Appeals for the Ninth District to void the Civil Investigative Demand since the agency was unconstitutionally structured.

The CFPB is warning the court that if it rules in Seila Law’s favor,  it could “be used to raise doubts about the validity of other actions the Bureau has taken over the past decade and that a fully accountable Director has now also ratified. These actions include, for example, regulations governing the nation’s multitrillion-dollar mortgage market.”

Bureau officials warned that the potential for disruption if the validity of the agency’s actions were called into question “would be difficult to overstate.”

Similar questions have been raised, but not yet answered, in cases pending in the second and fifth circuit appeals courts.

Related:

Citing Supreme Court Decision, CFPB Director Kraninger ‘Ratifies’ Past Agency Actions

Supreme Court Ruling Creates More Uncertainty for CFPB’s Future

Supreme Court Declares Single-Director Structure of CFPB Unconstitutional

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