Federal judge pans consumer watchdog agency

A New York federal judge ruled Thursday that the structure of the Consumer Financial Protection Bureau is unconstitutional and that the watchdog agency should be eliminated.

Senior U.S. District Judge Loretta Preska threw out the bureau’s lawsuit against a New Jersey company that the bureau had accused of scamming former NFL players and Sept. 11 emergency medical workers out of millions of dollars.

Preska’s ruling contradicts a decision by a U.S. appeals court on the issue and increases the likelihood that the CFPB’s constitutionality could become fodder for the Supreme Court.

Noting that the decision by the U.S. Court of Appeals for the District of Columbia Circuit was not binding in New York, Preska said she “respectfully” disagreed.

The independent structure of the CFPB has long been at the center of a fierce partisan debate over the agency, which was created during the Obama administration in response to the global financial crisis.

The CFPB is ruled by a single director rather than a multimember commission and gets its funding from the Federal Reserve rather than Congress. The bureau’s director also can only be fired for cause by the president, another element of independence.

The CFPB’s supporters say these streaks of independence give the agency needed freedom from political and financial pressures.

But Republicans and business leaders complain that it has made the CFPB a rogue, unaccountable force.

The contradictory court rulings make it more likely that the Supreme Court could ultimately be called on to decide the fate of the agency, legal experts said.

“It will make the issue more