1. Statutory Foundation

Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010 - Title X created Consumer Financial Protection Bureau.

Purpose - Sec 1021: Implement and enforce Federal consumer financial law to ensure markets for consumer financial products are fair, transparent, competitive.

Jurisdiction - Sec 1022, 1024, 1025:

• Covered Persons: Any person offering or providing consumer financial product/service - mortgages, credit cards, student loans, payday loans, debt collection, credit reporting.
• Supervised Entities:
  1. Banks/Credit Unions > $10bn assets - Exclusive supervisory and primary enforcement
  2. Banks < $10bn - CFPB has enforcement but prudential regulator has supervision
  3. Nonbanks - All mortgage originators/servicers, payday lenders, private student lenders, plus Larger Participants defined by CFPB rule - e.g. >$10bn in auto servicing, >7m consumer credit reports/year.

2. Oversight Structure - Why It Is Unique and Contested

Unlike other agencies, CFPB was designed to be insulated.

A. Internal Oversight:

• Single Director - Sec 1011: Originally 5-year term, removable only for cause - inefficiency, neglect, malfeasance.
• Funding - Sec 1017: NOT through Congressional appropriations. Director requests funds from Federal Reserve Board's earnings, up to 12% of Fed's operating expenses. ~ $600-700m annually. Fed cannot deny if under cap.

B. External Oversight:

1. Financial Stability Oversight Council [FSOC] - Sec 1023: Can set aside a CFPB rule by 2/3 vote if it threatens safety of banking system. Never used.
2. Congressional Oversight: Semi-annual testimony to Senate Banking and House Financial Services. GAO audits.
3. Judicial Review: All enforcement actions subject to de novo review in federal district court.

This insulation is what led to constitutional litigation.

3. Supervisory Powers vs Enforcement Powers

Supervision - Sec 1024-1025:

• Examination authority like a bank regulator. Can enter premises, demand records, interview employees.
• Issues Supervisory Letters, Matters Requiring Attention, and can refer to Enforcement.[MRAs]
• No public disclosure of supervisory findings - Confidential Supervisory Information.

Enforcement - Sec 1052-1055:

• Civil Investigative Demand [CID] - Sec 1052: Equivalent to subpoena. Bureau issues without court order - demand for documents, interrogatories, oral testimony. Recipient can petition to modify in DC District Court.
• Administrative Adjudication - Sec 1053: CFPB can bring case before its own Administrative Law Judge [ALJ].
• Federal Court Litigation: File in federal district court for injunction, rescission, restitution, disgorgement, and Civil Money Penalties - Tier 1: $7,633/day [no knowledge], Tier 2: $38,175/day, Tier 3: $1.9m/day.[reckless][knowing]
• Core Substantive Authority - UDAAP - Sec 1031, 1036: Prohibition of Unfair, Deceptive, Abusive Acts or Practices. This is 80% of CFPB enforcement.
  • Unfair: Substantial injury not reasonably avoidable, not outweighed by benefits.
  • Deceptive: Representation likely to mislead reasonable consumer.
  • Abusive: Takes unreasonable advantage of lack of understanding or inability to protect interests.

4. Detailed Case Laws - Constitutional and Enforcement

A. CONSTITUTIONAL CHALLENGES - The Existential Cases

1. PHH Corporation v. CFPB, 839 F.3d 1 [D.C. Cir. 2016], reheard en banc 881 F.3d 827
Facts: CFPB ALJ fined PHH $109m for RESPA violations for mortgage reinsurance kickbacks. PHH argued Director's removal protection violated separation of powers.
Holding: Initial panel held structure unconstitutional. En banc reversed - held Director's for-cause removal was constitutional because CFPB is not purely executive. Created circuit split that led to SCOTUS.[2018]

2. Seila Law LLC v. CFPB, 591 U.S. 197 - LANDMARK
Facts: Law firm refused to comply with CID, arguing CFPB structure unconstitutional.
SCOTUS Holding [5-4]: Single Director removable only for cause violates Article II - separation of powers. President must have power to remove at will.
Remedy: Severed the for-cause provision - Sec 1011(c)(3) is severable. CFPB continues to exist, but Director is now removable at will. President Biden removed Director Kraninger same day.
Principle: CFPB's enforcement actions before 2020 remain valid - ratification doctrine.[2020]

3. Community Financial Services Association of America v. CFPB, 601 U.S. 416
Facts: Payday lending trade group challenged CFPB's 2017 Payday Lending Rule, arguing funding through Federal Reserve violates Appropriations Clause - Art I Sec 9 Cl 7 - money can only be drawn from Treasury by appropriation.
5th Circuit in 2022 agreed - declared entire funding unconstitutional, invalidated Payday Rule.
SCOTUS Holding [7-2], Justice Thomas writing: CFPB funding IS constitutional. Appropriations Clause requires only a law authorizing withdrawal, not necessarily annual Congressional appropriation. Dodd-Frank itself is that law - it specifies source and cap. Reversed 5th Circuit.
Impact: Saved CFPB from defunding. But left open other challenges.[2024]

4. CFPB v. Law Offices of Crystal Moroney, 2d Cir. 2023
Second Circuit applied CFSA. Held even if funding was problematic, Supreme Court's decision validates all past enforcement. Established retroactive ratification.

B. ENFORCEMENT AND UDAAP CASE LAWS

5. CFPB v. Ocwen Financial Corporation, S.D. Fla. 2017 - Present
Facts: CFPB alleged Ocwen, largest nonbank mortgage servicer, had systemic servicing failures - illegal foreclosures, deceptive loss mitigation, failing to credit payments.
Holding: Produced $2bn+ consent judgment framework. Established principle: Servicer is strictly liable for failure to follow Regulation X - Real Estate Settlement Procedures Act. Deceptive practice includes telling borrowers they qualify for modification when they don't.

6. CFPB v. Navient Corporation, M.D. Pa. 2017, 3d Cir. 2021
Facts: CFPB alleged Navient, largest student loan servicer, steered borrowers into forbearance instead of income-driven repayment to save costs, deceptive.
Court Holding: Denied Navient's motion to dismiss - held that even if conduct was allowed by Department of Education guidance, CFPB can still pursue UDAAP. Established concurrent jurisdiction - Education contract does not immunize from CFPB.

7. CFPB v. PHH Mortgage - RESPA Section 8
After PHH constitutional case, merits returned. D.C. Circuit held CFPB's interpretation of RESPA Section 8 - referral fees - cannot be applied retroactively beyond 3-year statute of limitations. Limited CFPB's ability to expand enforcement through novel interpretations without rulemaking.

8. CFPB v. Townstone Financial, N.D. Ill. 2024
First major redlining case against nonbank. CFPB alleged Townstone discouraged Black applicants through racially charged radio show.
Court: ECOA redlining claims apply to prospective applicants, not just existing - even discouragement is violation. Settlement $105k but set precedent for CFPB using ECOA + UDAAP for fair lending.

9. CFPB v. TransUnion, 2022 - Credit Reporting
CFPB alleged TransUnion violated consent order by deceptively marketing credit scores.
Holding: $15m penalty + $8m consumer redress. Established CFPB's power to enforce prior consent orders as independent violations under Sec 1053, with separate penalties.

C. SUPERVISORY AUTHORITY CASES

10. CFPB v. Accrediting Council for Independent Colleges and Schools [D.C. Cir. 2017]
Bureau issued CID to for-profit college accreditor. Court quashed CID - held CFPB's supervisory authority under Sec 1024 does not extend to entities merely affecting consumer finance; must be directly engaged in financial service. Limited overreach of CID to non-financial institutions.

5. Enforcement Process - Practical Compliance View

1. CID Response: 20 days to petition to modify. Most litigation starts here. Grounds - CID too broad, seeks privileged material.
2. NORA - Notice and Opportunity to Respond and Advise: Pre-suit process - staff sends NORA letter stating potential violations. Company has 14 days to respond. This response decides if case settles.
3. Settlement: 90% cases settle via Consent Order - includes conduct provisions, compliance plan, independent consultant, civil penalty. Published in CFPB Enforcement Database and enforceable in court.
4. Litigation Defense Strategy: Two successful defenses since 2020:
   a) Statute of Limitations - 12 U.S.C Sec 5564(g) - 3 years for discovery.
   b) Ratification - After Seila Law, Director must ratify enforcement action.

Current Risk Areas in 2024-2026:

• Junk Fees initiative - overdraft, late fees under UDAAP unfairness
• Buy-Now Pay-Later as Larger Participant
• Data broker and FCRA enforcement against credit bureaus
• Open Banking - Sec 1033 rule on data sharing