Cq-roll Call, Inc. Legal experts and consumer advocates say that if the High Court rules in favor of CFSA, a group that represents payday lenders, it could have a Experts say that any rules issued by the CFPB in the last 12 years, whether they are about credit cards or mortgages, payday loan companies, or Some regulators like the Federal Reserve and government programs like Social Security share a similar funding model to the CFPB’s; they may also be called into question.
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future is on the line before the Court,” Better Markets, a consumer advocacy group, wrote Monday.
A ruling could come as late as June 2024.
Why the CFPB’s funding may be unconstitutional
The Consumer Financial Protection Bureau headquarters in Washington.
Samuel Corum/Bloomberg via Getty Images[The CFPB’s]The CFPB was established in 2011 by the Dodd-Frank financial-reform law in the wake of the Great Recession.
Lawmakers created the federal agency to protect consumers from predatory financial practices. The CFPB has received $17.5 billion for financial relief to about 200 million people according to data from the agency. In the case at hand, the CFSA, a trade group, sued the CFPB to challenge a rule passed in 2017 that targeted payday lenders The breakdown of the process that Congress uses to allocate funding to various parts of the federal government almost caused a shutdown on Sunday. Instead, Congress doesn’t approve the CFPB funding each year. The Fifth Circuit ruled that the payday rule was illegal. This ruling is unprecedented, according to the Congressional Research Service. The Supreme Court could gut the CFPB
If it were to agree with the Fifth Circuit, it would pose an “existential threat” to Coleman, a partner at the law firm Orrick and former deputy general counsel for litigation at the CFPB from 2016 to 2021.
For “Without employees, an organization can’t accomplish anything.” “
Rohit Chopra, director of the CFPB, testifies during a House Financial Services Committee hearing on June 14, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Additionally, such a ruling would call into question the agency’s past and future rulemakings, experts said.
could cast legal doubt over every substantive action that the CFPB has taken since at least July 21, 2011, when the Bureau’s authorities went into full effect, if not since its inception a year earlier, as well as any future Bureau action,” the Congressional Research Service said.
Such a ruling would have a “devastating” impact on the real estate industry, including the destabilization of the mortgage market, for example, according to a court filing made by industry groups including the Mortgage Bankers Association, the National Association of Home Builders and the National Association of Realtors.
Numerous other government agencies and programs are funded outside the annual appropriations process, said Rachel Gittleman, financial services outreach manager at the Consumer Federation of America.
They include, among others: the Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Federal Housing Finance Agency, National Credit Union Administration, Farm Credit Administration, Farm Credit Insurance Corporation, Medicare, Medicaid, Social Security, the Affordable Care Act and unemployment benefits, she said.
Such an outcome is unlikely, however, Coleman said. The outcome is unlikely, however, Coleman said. He said that the latter could be difficult, especially in an election year when Congress is divided. “We’ll learn a lot on Tuesday, after hearing from the justices,” Coleman stated.