Judge Rules CFPB Structure Unconstitutional

A federal judge in New York has ruled that the structure of the Consumer Financial Protection Bureau (CFPB) is unconstitutional. According to Reuters, the decision by U.S. District Judge Loretta Preska prohibits the agency from suing a company that advances money to people awaiting settlement payout, but the office of New York Attorney General (AG) Barbara Underwood can continue pursuing the case against New Jersey-based RD Legal Funding.

Last year, the New York AG and CFPB filed a lawsuit against RD Legal, as well as Roni Dersovitz, the company’s founder and owner, for allegedly scamming 9/11 heroes out of money they needed to cover medical costs, lost income and other needs.

“We will continue to vigorously pursue our case against RD Legal for as many victims as possible,” said Amy Spitalnick, a spokeswoman for the Attorney General’s office.

This recent ruling follows a February decision by the federal appeals court in Washington that upheld the CFPB’s structure. If another appeals court upholds Preska’s decision, the issue will likely go to the U.S. Supreme Court.

Earlier this week, it was reported that President Donald Trump nominated Kathy Kraninger to be the head of the CFPB, replacing Acting Director Mick Mulvaney. The move is seen in a further step to dismantle the regulations put in place by the Obama administration, as Kraninger  doesn’t have experience in finance, banking or consumer issues.

“The Trump Administration’s nominee to lead the Bureau has an opportunity to be a champion for consumers and not the financial industry,” Nancy Pelosi said in a statement. “But her apparent lack of experience in consumer finance, coupled with the Administration’s hostility to consumer protection, raises questions about her qualifications to lead such an important agency.”

Kraninger is widely expected to maintain Mulvaney’s steps to dismantle the power of the CFPB under former director Richard Cordray. She doesn’t believe government intervention is needed to foster robust entrepreneurship in the country, although she does think the government plays a role in stopping the fraudulent activity that could harm the markets and consumers.