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Defendant Urges Court to Rule on CPFB’s Constitutionality before Moving Forward with Case

On May 30, a defendant involved in an action brought by the CFPB in federal district court in the Southern District of New York, asked the court, prior to subjecting the defendant to a discovery conference, to rule on an earlier motion to dismiss made by the defendant challenging the constitutionality of the CFPB.

The defendant, RD Legal Funding LLC, is a settlement advance firm based out of New Jersey. In February, the CFPB accused RD Legal Funding of deceiving 9/11 first responders and NFL retirees into accepting cash advances of settlement money that were actually, according to the CFPB, high-cost loans. RD Legal Funding responded by rebuffing these accusations and challenging the authority of the CFPB to bring them. Specifically, RD Legal Funding moved to dismiss the case on the basis that the structure of the CFPB constitutes a violation of the Constitution’s Separation of Powers Clause because the CFPB is not subject to government oversight and has a single director. According to RD Legal Funding, the CFPB is therefore unconstitutional and without the authority to bring the suit. Because RD Legal Funding believes the constitutionality of the CFPB is a threshold issue in the case, it asked the court to delay any discovery conference until that issue is resolved.

RD Legal Funding’s challenge to the constitutionality of the CFPB notably coincides with other similar challenges to the embattled agency. In particular, the CFPB is also facing a challenge to its constitutionality in the PHH Corp. et al v. CFPB lawsuit, in which a panel of three judges from the D.C. Circuit determined the CFPB’s structure is unconstitutional because it’s an independent agency led by a single individual who can only be removed by the president for cause. The panel’s decision was later vacated after an en banc hearing of the decision was granted and the results of the en banc hearing are still pending.

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