CFPB v. RD Legal

In March 2019, the Consumer Financial Protection Bureau (CFPB) and the State of New York brought an enforcement action against a company that, they alleged, engaged in fraudulent practices designed to induce beneficiaries of the NFL concussion settlement and the September 11 victims’ fund to assign their rights to the company in return for cash payments. The defendants sought to have the case dismissed on the ground that the CFPB’s structure, with a single director protected against termination at will by the President, violates constitutional principles of separation of powers. The district court (Southern District of New York) granted the motion, holding that the CFPB is unconstitutionally structured and that the substantive provisions of the Dodd-Frank Act on which the CFPB’s and New York’s claims were based could not be severed. Thus, the district court dismissed the claims even though it found that the allegations made by the CFPB and New York stated a claim for violation of the Act’s antifraud provisions. The CFPB and New York appealed to the U.S. Court of Appeals for the Second Circuit.

Public Citizen, together with the Center for Responsible Lending, Consumer Federation of America, Consumer Reports, National Association of Consumer Advocates, National Consumer Law Center, Tzedek DC, and U.S. Public Interest Research Group Education Fund, Inc., filed a brief as amici curiae in March 2019, explaining that Congress may protect the independence of regulatory agencies by protecting their heads against at-will removal by the President, and that the argument against the CFPB’s constitutionality distorts separation-of-powers principles in asserting that only multi-member commissions can receive such protection.

Following the decision in Seila Law, the Second Circuit affirmed the district court’s holding that the CFPB’s structure was unconstitutional, reversed its holding that the unconstitutional provision is inseverable from the remainder of the Dodd-Frank Act’s provisions concerning the CFPB, and remanded for a determination whether the actions challenged have been validly ratified.