Yesterday, the Supreme Court ruled that the funding structure for the Consumer Financial Protection Bureau is constitutional. This was a very closely watched case, because had the ruling gone the other way, it could have created chaos and thrown the future of the Bureau into question. AccountsRecovery asked a number of legal experts to share their thoughts on the ruling and what it means for the accounts receivable management industry. This is what they had to say:
Rick Perr, Kaufman Dolowich
After oral argument, it is not a surprising result. In fact, from a pure academic perspective, the case was suspect from the beginning. The Constitution does not restrict how Congress can use its power of the purse. As most of the Justices noted at oral argument, just because Congress has never enacted a funding process similar to that of the CFPB does not mean it cannot do so or that the funding mechanism is unconstitutional.
It is important for the ARM industry to focus on the CFPB’s substantive actions instead of trying to wound it on process. Both major challenges on process – appointment of a single director and funding – have not been successful. And most members of Congress do not appear to have the stomach to change anything regarding the Bureau’s structure. The CFPB is here to stay.
Don Maurice, Maurice Wutscher
It is an interesting opinion — not for the result, but how it was delivered. I never imagined a result that had Justice Kavanaugh, who has been previously highly critical of the Bureau, joining a concurrence authored by Justice Kagan supporting the Bureau’s authority — no less a majority opinion delivered by Justice Thomas. Otherwise, the result was not a surprise. It would have been quite a shocker had it gone the other way!
Joann Needleman, Clark Hill
That Justice Thomas authored the opinion suggests how weak the industry’s argument was. He has, in other opinions, been very skeptical of the power of administrative agencies. This challenge was about the definition of appropriations, or at least this is how CSFA wanted to frame it. They failed and it was evident in oral argument. He spent his entire opinion writing the history lesson of appropriations, basically saying to CFSA, you failed to do your homework.
Takeaways:
- The Court has closed the book on whether there should be a CFPB. However, there seems to be an appetite for challenges on how they wield power. Justice Thomas was very clear that his opinion addressed only the narrow issue of what does it mean to “appropriate”.
- The door for challenging the CFPB’s authority and how they exercise their authority is still very much at play.
- The battle for the credit card late fee rule is back on. The Texas District Court stayed the case based on this Supreme Court decision and for nothing more. There are a few other cases that are stayed pending this case and I expect to see more litigation about the CFPB’s authority.
- The decision is not surprising and it will not be surprising to the CFPB. They have been quietly coordinating behind the scenes, especially around supervision, to really unleash once this decision came out.
- It will be like waking up a bear during hibernation.
Manny Newburger, Barron & Newburger
The CFSA decision will impact a number of pending cases. In enforcement actions that have been stayed, the stays will be vacated, and it remains to be seen whether the outcome in CFSA will impact the credibility of future arguments made by the defendants.
The recent injunction blocking the implementation of the CFPB’s credit card late fees rule was based on the Fifth Circuit’s CFSA decision that has now been reversed. Unless the plaintiffs in that case can persuade the court to maintain the injunction on other grounds (such as arbitrary and capricious rulemaking), it appears certain that the injunction blocking the rule will be vacated.
This will not impact CFPB losses based on alternative grounds such as the Major Questions doctrine.
Stefanie Jackman, Troutman Pepper
On balance, the outcome in the CFSA appeal was not surprising. Many predicted that the Court would reach this outcome, given the tone and tenor of oral argument. But this is the not the only opinion of significance this term. The Court also ruled that in granting a motion to compel arbitration, courts must stay – not dismiss – the related court case. This result means the party that wished to remain in court will not have any immediate right to seek an interlocutory appeal upon dismissal but rather, will have to wait until the conclusion of the arbitration to seek such review. In addition, we are still waiting to see how the Court rules in the pending Chevron cases – Loper Bright Enterprises and Relentless – which could impact the scope of current CFPB rulemakings if the CFPB wishes to revisit those rulemakings and their underpinnings if Chevron is overturned or revised.