By now you’ve heard that the United States Supreme Court has agreed to decide the fate of the Consumer Financial Protection Bureau (CFPB) by finally considering the question of whether the bureau’s funding mechanism holds up to constitutional scrutiny.
Lost in much of the coverage, however, is what this really means for the bureau in the interim. While the court did agree to hear the case, they will not do so until next term. This means a ruling on the matter may not come before June 2024. During that time, the bureau will operate with a dark cloud hanging overhead. Given the split in the 118th Congress, it is safe to assume that legislation will not be enacted to “save” the bureau by addressing the funding mechanism, should the court uphold its unconstitutionality.
In the meantime, the Fifth Circuit maintains that the CFPB is unconstitutionally funded. This calls into question the effectiveness of revisions to the CFPB exam manual in March of last year, which is currently being challenged by IBAT and other associations in a lawsuit. This doubt extends to all rules that have been promulgated by the agency since its inception, including the TILA/RESPA mortgage rules enacted following the Dodd-Frank Act.
Still more intriguing is the pending release of final rules on the implementation of Section 1071 of the Dodd-Frank Act, which would require HMDA-like reporting on all small business loans. Per a court order, the bureau must promulgate rules implementing Section 1071 by the end of this month. Depending on the implementation date of those rules, banks will be forced to decide when and whether to spend the significant resources expected to be required to implement that new data collection regime.
Despite all of this doubt, the bureau’s greatest weapon at this time is its ability to cast aspersions on anything it doesn’t like – as in the bureau’s consistent classification of overdraft fees as “junk fees.” This steady drumbeat might stir up voter support for the future of the bureau and put it at the center of Presidential and Congressional politics in 2024. Until then, expect a louder more boisterous CFPB. After all, noise may be the only effective impact it can make.