NEWS: The Consumer Financial Protection Bureau’s (CFPB’s) funding mechanism, which bypasses the congressional appropriations process, is constitutional, the Supreme Court ruled today, reversing a lower federal appeals court. The case had threatened to curtail the CFPB’s power.
In a 7-2 decision, the high court rejected an argument by payday lenders that Congress’s decision more than a decade ago to insulate the CFPB from the annual budget debate ran afoul of the Constitution’s clause on appropriations of federal money. For most federal agencies, Congress provides funding on an annual basis, which forces the agencies to ask Congress for renewed funding every year.
Today’s decision rejected an industry challenge to a never-enforced CFPB payday lending rule. In a 2019 Compliance Courier, The League wrote that the federal “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule “potentially applies to some credit union products. It is important to carefully review products for coverage because the compliance requirements are viewed as burdensome. See ii Release No. B080 – Payday and Vehicle Title Loans. If the court’s stay is lifted, affected credit unions may be left with little time to come into compliance or revise loan programs to avoid coverage under the rule.”
At this time, we don’t have enough information to say when compliance with that payday lending rule may be required.
Today’s ruling will also impact the enforcement of some other CFPB regulations, because several rules and lawsuits that have been on hold pending the outcome of the payday lending rule case.
For example, in a Compliance Courier just this week, we told you that a federal trial court in Texas had issued a temporary injunction to stop enforcement of a CFPB rule that caps credit card late fees at $8 per incident for card issuers with at least one million open accounts. We explained that: “In issuing the preliminary injunction, the Texas judge found that the plaintiffs had established a likelihood of success on the merits because of a different decision – from the Fifth Circuit U.S. Court of Appeals, which held that the CFPB’s funding mechanism violates the U.S. Constitution. That case is now on appeal before the U.S. Supreme Court …. The high court’s opinion could impact this lawsuit on the credit card late fees rule, as well as several other pending lawsuits.”
We will keep Wisconsin credit unions informed as we learn more about the consequences of today’s Supreme Court ruling and its impact on various CFPB regulations.