As many of you know, we periodically blog about the goings on at the Consumer Financial Protection Bureau. Sometimes referred to as a “superagency,” the CFPB was created by Congress in an effort to consolidate authority over consumer financial transactions from seven agencies to one. As a result the CFPB has jurisdiction that spans virtually every living room and board room as it can enforce and regulate laws relating to every form of banking, lending, credit and efforts to collect or settle debts.
However, in attempting to address the financial crisis that had rocked the economy by creating the CFPB, the question is did Congress go too far? Did it create an agency that is too powerful and too independent? That is the question posed in a recent complaint filed against the agency in federal district court for the District of Columbia (note that the suit was filed by Venable lawyer Randy Miller). Plaintiffs in the case are a Connecticut lawyer, Kim Pisinski and an attorney support outsourcing company, Morgan Drexen. Attorney Pisinski engages in a general law practice but specializes in representing families of disabled children. Many of these families also have financial difficulties and as a result Pisinski has broadened her practice to include bankruptcy counseling. The CFPB is investigating whether the bankruptcy aspects of her practice and the paralegal support provided by Morgan Drexen violated the Telemarketing Sales Rule.
The lawsuit alleges that the CFPB’s structure is unconstitutional in that Congress failed to create sufficient checks and balances and accountability for the new agency. Although it is an executive agency, the CFPB lacks checks and balances found in the agencies from whom its authority was transferred and found in other executive agencies that exercise broad executive and legislative powers. These checks and balances can include removal power by the President “at will;” governance of the agency by a multi-member, often bipartisan, Commission and budgetary oversight by Congress and the President. However, the CFPB has a single director, removable by the President only for malfeasance and its approximately half-billion dollar budget is statutorily required to be set aside from bank fees collected by the Federal Reserve. In addition, if there is conflict between the interpretation of consumer finance laws between the CFPB and the other more accountable agencies who have also administered such laws (and in some cases continue to do so concurrently with the CFPB) courts are directed to defer to the CFPB’s interpretation.
Briefing on the merits as well as any jurisdictional arguments the government wishes to raise is on a fast track, with all briefs due by the end of September. Stay tuned for what could be another interesting chapter in a line of cases dealing with such Congressional enactments as the balanced budget amendment, the office of Independent Counsel, the line item veto and even way back to the creation of the multimember FTC and the inability of the President to remove an FTC Commissioner without cause.