"Emergency Appeal": Nexus Challenges the Constitutionality of the CFPB in the 4th Circuit Court
Written by: Michael Phillips
HARRISONBURG, VA – The ongoing legal battle between Nexus Services Inc., a leading figure in immigrant bond securitization, and the Consumer Financial Protection Bureau (CFPB) intensified Friday as Nexus filed an emergency motion in the U.S. Fourth Circuit Court of Appeals. The motion seeks a stay of trial or an injunction against the CFPB, basically asking the appeals Court to block a trial which Nexus claims is fueled by unconstitutional funding schemes, according to the company's legal filings.
Nexus/CFPB Legal History The roots of this contentious relationship date back several years. In February of 2022, the CFPB filed its current lawsuit against Nexus in the Western District of Virginia, alleging various violations of consumer protection statutes. The CFPB was joined by the States of New York, Massachusetts, and Virginia in the litigation. However, this wasn't the first courtroom showdown between the CFPB and Nexus. In 2017, Nexus successfully thwarted a CFPB investigation into its business practices, effectively halting the probe. Although this was a temporary reprieve, it highlighted the ongoing tension between Nexus and the agency. The current litigation, though reminiscent of past skirmishes, carries significant weight for both parties. The Director of the CFPB has portrayed the lawsuit, the first enforcement action brought by the Biden administration, as a golden opportunity for the bureau, potentially allowing it to broaden its jurisdictional reach. This ambitious vision, combined with the agency's perseverance and unlimited money sources, signifies its unwavering commitment to its litigation efforts. Virginia curiously remains in the litigation, in spite of the fact that Virginia's Attorney General signed onto a brief asking the Supreme Court to rule that the CFPB is unconstitutionally structured.
Nexus Claims The CFPB is Illegally Funded and Unconstitutionally Structured Nexus, on the other hand, has not hesitated to challenge the very foundation of the CFPB's authority. The company contends that the CFPB is unconstitutional in its structure and operations. It's this fundamental disagreement that has led Nexus to file the emergency motion, arguing that the litigation should be paused while the constitutional question is resolved.
Nexus had raised this question with the trial Court, and the Court denied Nexus' request to dismiss the case against it. The Court, however, went further and in an order released last week articulated a position that the Fifth Circuit holding was incorrect. The Court's collateral order related to such a significant constitutional issue is what led Nexus to file its appeal and request for stay, commented Evan Ajin, Nexus' Vice President of Operations.
Nexus bases its arguments on a recent ruling from the Fifth Circuit in Com. Fin. Servs. Assoc. of Am., Ltd. v. Consumer Financial Protection Bureau, 51 F.4th 616. This decision underscores the unique "double-insulated" funding mechanism of the CFPB. The Fifth Circuit contended that the Bureau's funding, shielded from congressional oversight and further insulated by Congress's relinquishment of its review powers, skirts the constitutional boundaries of agency accountability. This model, designed to protect the CFPB from political influence, ironically renders it independent and unanswerable not only to Congress but, by extension, the American people. Drawing from historical precedents and the foundational principles of the Constitution, the court suggests that the intertwining of executive power with unchecked financial autonomy represents a significant departure from the intended separation of powers. It is against this backdrop that Nexus challenges the very legitimacy of the CFPB's actions.
The Fourth Circuit Appeal The Fourth Circuit Court of Appeals accepted the emergency motion. The court has swiftly mandated the government appellees to formulate a response, setting a strict deadline of 10 am on the upcoming Monday, August 14, 2023. The stakes in this legal showdown are far-reaching. Should the Fourth Circuit align with the Fifth's stance, it would starkly contrast with the Second Circuit's validation of the CFPB's funding structure. Such a decision could not only alter the dynamics of Nexus's prolonged skirmish with the CFPB but also has the potential to reshape the very fabric of regulatory oversight in the financial sector. As the courts grapple with the constitutionality of the Bureau's foundation, the reverberations of their decisions may be felt across the legal landscape and beyond. The coming chapters in the Nexus-CFPB saga promise profound implications for the balance of power in U.S. governance.
Disclaimer: Breaking Through was once owned and operated by Nexus Services, but became an independent media outlet in 2021. This information is provided anytime Breaking Through covers news regarding Nexus or its family of companies, out of an abundance of caution and in the interest of full disclosure.