NEW YORK — The U.S. government’s beleaguered consumer finance watchdog agency is unconstitutionally structured, a judge said Thursday as she disqualified the agency from serving as a plaintiff in a lawsuit.
U.S. District Judge Loretta A. Preska in Manhattan reached the conclusion about the Consumer Financial Protection Bureau in a written decision.
Her ruling related to a lawsuit brought against companies loaning money to former National Football League players awaiting payouts from the settlement of a concussion-related lawsuit and to individuals slated to receive money for injuries sustained when they helped in the World Trade Center site cleanup after the Sept. 11, 2001, terrorist attacks.
She let claims brought by the New York state attorney general proceed, but dismissed those that were brought by the CFPB, saying it “lacks authority to bring this enforcement action because its composition violates the Constitution’s separation of powers.”
In ruling, Preska sided with three judges who dissented from the six-judge majority in a January ruling by the U.S. Court of Appeals in Washington. The majority found that the agency director’s power is not excessive and that the president should not have freer rein to fire that person.
Lawyers for the CFPB did not comment.
Amy Spitalnick, a spokeswoman for New York’s attorney general, said the office “will continue to vigorously pursue our case … for as many victims as possible.”
The bureau was created after the 2008 financial crisis to ensure consumers were not being exploited and banks were complying with consumer protection laws.
Republican President Donald Trump recently named Kathy Kraninger to head the CFPB. U.S. Sen. Elizabeth Warren, a Massachusetts Democrat who helped create the CFPB, has said she wants to block the nomination of Kraninger, who is currently an associate director at the Office of Management and Budget, until she knows if Kraninger had a role in the policy to separate children from parents crossing the U.S.-Mexico border.
Mick Mulvaney, Trump’s budget chief, has been filling in as the bureau’s acting director along with running the OMB since late November when his predecessor, Richard Cordray, resigned.