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Financial Services Law Insights and Observations

Court dismisses NYAG’s claims under CFPA after determining Title X is invalid

Courts CFPB Succession CFPA Dodd-Frank State Attorney General Single-Director Structure

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On September 12, the U.S. District Court for the Southern District of New York issued an order dismissing the New York Attorney General’s (NYAG) claims against a New Jersey-based finance company and its affiliates (defendants) under the Consumer Financial Protection Act (CFPA).  In doing so, the court reversed its June ruling that the NYAG could proceed with its CFPA claims despite the court’s conclusion that the CFPB’s organizational structure, as defined by Title X of the Dodd-Frank Act, is unconstitutional and therefore, the CFPB lacks authority to bring claims against the defendants, as previously covered by InfoBytes

According to the new order, the remedy for Title X’s constitutional defect is to invalidate Title X in its entirety, which therefore invalidates the NYAG’s statutory basis for bringing claims under the CFPA.  The court concluded that it lacked jurisdiction over NYAG’s remaining state law claims and dismissed the NYAG’s action against the defendants in its entirety.

The amended order is the culmination of a process that began with an August request by the CFPB for the court to enter a final judgment with respect to its dismissal of the CFPB’s claims, which would allow the Bureau to appeal to the U.S. Court of Appeals for the 2nd Circuit. (Previously covered by InfoBytes here.) After numerous letters were submitted by all the parties, the court granted the CFPB’s request for entry of final judgment and granted the defendant’s request to stay the NYAG claims during the pendency of the CFPB’s appeal. The NYAG subsequently responded with a letter requesting clarity on the court’s jurisdiction over the claims, which resulted in the new order dismissing the NYAG claims in their entirety.

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