Tuesday, September 26, 2023

I’ve been thinking about the cases SCOTUS will hear this fall and what they might mean for our industry.

If you’ve followed our coverage, you’re up to speed on CFPB v Community Financial Services Association of America so far, and we will keep you fully informed about the case and its outcomes, from oral arguments to when a decision is handed down, and the aftermath. This is the case where the CFPB’s funding structure has come under scrutiny.

In a nutshell, at issue is whether a rule crafted by the CFPB (in this case its Payday Lending Rule) should be struck down, after an underlying question is answered of whether the funding mechanism of the bureau comports with or violates the appropriations clause of the Constitution. If the Payday Lending Rule can be struck down under such terms, how many other rules that CFPB has issued since its inception could also be struck down? And what would that mean for consumers and workers in the real estate sector?

It’s important to note that CFPB’s funding structure is not entirely unique. It’s also important to note the circuit split between the often-warring 5th and 2nd U.S. Circuit Courts of Appeals. The 2nd circuit did not find the bureau’s funding violative.

Finally, it’s worth remembering that Congress expressly set up the bureau’s funding the way they did in the Dodd-Frank Act itself in an attempt to keep the bureau’s funding non-partisan. So, it’s difficult to argue that Congress didn’t realize what it was doing by creating the structure of the bureau obtaining its funds from The Federal Reserve, rather than have its funding appropriated annually by Congress. Rather, should Congress have structured the funding the way they did?

Yet, many amicus briefs have also been filed, with a wide range of views and suggested remedies. If you’re curious how several credit union associations, the U.S. Chamber of Commerce, the American Bankers Association, 132 members of congress, 26 Republican Attorneys General Associations, and former Acting CFPB Director Mick Mulvaney feel, our friends at Ballar Spahr have a great recap here. The amici recommendations vary and are wide-ranging in their suggested remedies including: vacating only certain CFPB rules and actions, taking a pause on enforcement and rule-making while the bureau is dismantled and leave the matters to elected officials, allow a three-to-six month window for Congress to bring the CFPB into its traditional appropriations model (and then arguably go back through the APA process of an entire new set of rule-making ). It doesn’t take much reading to predict that several of those options would result in short-term market chaos.

So, this case comes to us at an interesting time, with a market still under-performing and a ruling very much needed to cure the circuit split. The SCOTUS ruling is likely to come out early summer of 2024, just in advance of a presidential election. And it comes at a time that is interesting from another perspective as well. Which we will discuss more next time.

Until then,

Mary Schuster
Chief Knowledge Officer
October Research, LLC