Attorneys, CUNA: CFPB Isn’t Dead Despite Court Ruling

CUNA says credit unions shouldn’t expect bureau to shift course in any way with decision likely to be appealed.

The CFPB may have been wounded last week by a federal appeals court that found its funding unconstitutional, but it’s not dead and will continue to press its regulatory agenda, CUNA and regulatory attorneys are saying.

The Fifth Circuit Court of Appeals last week said that because the bureau gets its funding directly from the Federal Reserve and not from Congress, the agency’s funding is illegal. As a result, a panel of three judges said that any past actions the bureau has taken also are illegal.

But the ruling only applies to districts in Louisiana, Mississippi and Texas and the bureau is unlikely to simply accept the outcome, said Jason Stverak, CUNA’s deputy chief advocacy officer for federal government affairs.

“The decision will most likely be appealed and the decision likely stayed until full circuit can rule,” he said. “I do not see the CFPB accepting this decision. It will go to full fifth circuit and then the Supreme Court.”

He added that credit unions should not assume that everything the bureau has done is now void, saying, “For CUs it’s status quo as the lawsuit plays out in my opinion.”

Legal Reaction to the Ruling

“The CFPB is not expected to alter its current priorities, agenda, and approach to oversight of consumer financial products and services,” the law firm of Greenberg Traurig said in its analysis of the Fifth Circuit’s decision. “Companies should continue to focus on compliance and risk mitigation.”

However, the attorneys noted that if the case is upheld on en banc review by the Supreme Court, or is adopted by other courts, it could impact all of the CFPB’s rulemaking and enforcement activities.

They added that while the case is being considered en banc or by the Supreme Court, companies will continue to make the funding argument in response to agency.

“Financial services companies may argue that even CFPB enforcement activities under laws and regulations that were not promulgated by the CFPB are unconstitutional, since the CFPB is only able to undertake such enforcement activity through a constitutionally impermissible source of funding,” the lawyers stated in their analysis.

Attorneys at Norton Rose Fulbright agreed that the agency is not expected to change its agenda.

“Until that process is resolved, the CFPB should be expected to operate on a business-as-usual basis, meaning that Director Rohit Chopra should not be expected to rein in his robust enforcement and supervision policies,” they wrote.

Political Response

Other reaction to the ruling continued to fall along ideological lines.

“Clearly, the court’s problem with the CFPB is not its funding structure, but that it actually protects consumers,” National Urban League President/CEO Marc Morial said. “We cannot allow our federal judiciary to be transformed into a tool of special interests. The full 5th Circuit must act immediately to reverse this specious and nakedly political ruling.”

“Today’s ruling is a blatant perversion of justice,” he added. “The justices barely even bothered to find a legal justification for what is obviously partisan favoritism. I expect to see the full 5th Circuit rectify this fiasco with all due haste.”

Morial and others pointed out that the three judges on the Fifth Circuit Court of Appeals were all nominated by former President Donald Trump, an avowed opponent of the CFPB.

One progressive group, Accountable.US went a step further, noting that one of the Judges, Cory Wilson received at least $10,500 in campaign contributions from the banking industry when he was a Mississippi state representative.

But a conservative group, Americans for Tax Reform said that the only way to rein in the agency is for Congress to subject it to the appropriations process.

“The only way to ensure that a future ruling does not overturn the Fifth Circuit’s decision is to codify a new funding structure that subjects the CFPB to the traditional congressional appropriations process,” the group stated. “The Fifth Circuit’s ruling should provide the confidence needed to move forward to ensure that the administrative state does not further absorb the power the Constitution clearly granted to the elected representatives in Congress.”