The recent U.S. Supreme Court decision confronting the leadership structure of the Consumer Financial Protection Bureau emboldened companies in long-running litigation against the agency, forcing federal judges to weigh whether the regulator can press forward with enforcement actions that were initiated under an unlawfully appointed leader, the National Law Journal reported. In the 5-4 decision, the high court in June struck down the CFPB’s single-director design as unconstitutional, ruling that the president must be freely able to remove the agency’s leader at will and not just for cause. The divided decision resolved a constitutional question that had hung over the agency since its founding in the wake of the financial crisis, just as it created a new cloud of uncertainty over actions the CFPB took before the ruling. Many of those enforcement actions will now be tested anew. A week after the Supreme Court’s ruling, in the case Seila Law v. CFPB, the agency’s Trump-appointed director, Kathy Kraninger, took steps to protect regulations the agency had finalized in the past year. Kraninger issued a blanket “ratification” to provide industry with certainty that rules remained valid in light of the Supreme Court decision. With enforcement actions, Kraninger has taken a piecemeal approach, giving the endorsement of a “ratification” to lawsuits on a case-by-case basis. Those moves have quickly met resistance in the courts, namely in some of the CFPB’s highest-profile lawsuits. In July, Kraninger moved to protect the CFPB’s yearslong case against Navient, a leading student loan servicing company that was sued just days before President Donald Trump’s inauguration in 2017. Kraninger, who was confirmed to lead the CFPB in 2018, said in a court filing that she “considered the basis for the decision to file the complaint in this proceeding, and has ratified that decision.” Navient quickly contested the ratification as invalid. In a court filing on Wednesday arguing for the case’s dismissal, the company’s defense lawyers argued that the three-year statute of limitations for the CFPB’s claims had already run by the time Kraninger ratified the lawsuit.
