A huge ruling transpired yesterday, in that the Consumer Financial Protection Bureau has been found to be unconstitutional.

As a brief background, in the wake of the great recession, the CFPB was created ostensibly to protect the American consumer from a wide variety of predatory and sometimes outright fraudulent lending practices.  At the time, the primary focus was on keeping American’s from foreclosure as the housing market collapsed at the same time as unemployment grew, and people were losing their homes to predatory lenders.

The CFPB scope, not surprisingly, grew very quickly.   The CFPB now has it’s regulatory hands in payday loans, debt collection, credit cards and mortgages.

Our industry, the debt collection industry, has a black eye as the result of a few bad collection people, some fraudulent collection scams, and the general distaste most have when dealing with a debt collector.  Increased legislation, at the behest of the CFPB jeopardized the financial stability of many in the debt collection industry.  We know of many that closed up shop, or changed focus.

Now comes the ruling that the CRPB is unconstitutional, on the grounds that the Executive Branch, the President, does not have enough control over the bureau, not enough to meet the standards of the constitution.

It will be interesting to see how this plays out.  At the moment, we do not hear talk of the CFPB actually shutting down., however there is a lot of discussion around reform, and how to reign in this regulatory juggernaut, while at the same time staying true to the mission of helping protect Americans from fraudulent and/or predatory lending schemes.

Judge Kavanaugh, one of the judges on the Federal Appeals court that heard the case wrote:

“The CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency,”

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