Approximately 12 years from the time it was created, the Consumer Financial Protection Bureau, which was authorized through the Dodd-Frank Wall Street Reform and Consumer Protection Act, was ruled to be unconstitutional on October 22nd, 2022.
The Bureau was established in response to the financial crash of the markets, which was the result of the abuses in the mortgage industry in the housing market. This led to the collapse of many banks and financial services firms, one of which was Lehman Brothers.
The 5th Circuit Court of Appeals ruled on this and found that the “design of the CFPB violated the Constitution because it receives funding through the Federal Reserve rather than the appropriations legislation passed by Congress.” Originally, the architecture of the Bureau was established by the Congress in order to shield the Bureau from political pressures that might impact the oversight of the finance industry.
One of the issues that the court found was that the organizational structure of the CFPB had to do with the legality of the inability to remove the director of that Bureau. Additionally, back in 2020, the US Supreme Court also heard another case regarding the constitutionality of the CFPB and found that the single directive structure was such that it did not permit the firing by the President, and that was unconstitutional. But the Bureau itself would continue as it was created. The CFPB presently maintains the regulatory authority and enforcement over independent mortgage banks, depositories, fintechs and reverse mortgage industry entities at a national level.
According to the judge’s ruling, “Congress’s decision to abdicate its appropriations power under the Constitution and to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers.”
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Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single-family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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