On May 16, 2024, the U.S. Supreme Court ruled in a 7-2 decision that the CFPB's funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. This judgment is explained here.
Shortly after the ruling, the CFPB issued a statement saying: [the] A radical theory that would have destroyed the American financial market. The court rejected the payday loan lobby's arguments and made clear that the CFPB would continue. ” The CFPB went on to say, “This ruling confirms that the CFPB's funding structure is neither new nor unusual and is in fact an important part of the nation's financial regulatory system, and that it provides stability and continuity to the institution and the system as a whole.'' This supports the fact that it is bringing about ”
Today, the CFPB held a virtual press conference to answer industry questions regarding the status of pending matters. The CFPB noted that multiple rules are still being challenged in various courts, including the payday loan rule, the credit card late fee rule, and the 1071 small business loan rule. There are also 14 enforcement matters pending the Supreme Court's CFSA decision. The CFPB said it will file motions to lift the stay on any matters that have been put on hold pending a CFSA decision. However, the CFPB noted that in each of the pending issues, opponents have raised non-constitutional arguments and that it is necessary to resume litigation activity to contest these issues on the merits. ing. Additional rulings in the Rule Challenge Litigation, whether on the merits or not, could further impact the compliance deadlines and ultimate requirements of the Challenge Rule.
The CFPB also said in a press conference that it expects a favorable outcome from the Supreme Court and is “doing everything in its power” to hire, train and have enforcement personnel in the field. The CFPB said it is expanding its enforcement division and stands ready to continue working on behalf of consumers.
Additionally, the CFPB has issued informal guidance regarding the extension of the 1071 Small Business Lending Rule compliance deadline and plans to issue an interim final rule. Based on the 290-day period between the initial preliminary injunction issued in the Rio Bank of Texas case and the Supreme Court's May 16, 2024 decision, the CFPB extended the compliance deadline from its original date. For Tier 1 institutions, the compliance date is extended from October 1, 2024 to July 18, 2025, with initial filings required by June 1, 2026. For Tier 2 institutions, the compliance date extends from April 1, 2025 to January. For Tier 3 institutions, the compliance date is extended from January 1, 2026 to October 18, 2026, and the first submission must be completed by June 1, 2027.
Commenting on the ruling, Bob Bruksmit CMB, Chairman and CEO of the Mortgage Bankers Association, said:
“The MBA is relieved that the Supreme Court avoided a ruling that could disrupt the housing and mortgage markets and harm the economy and consumers. Decisions that override the agency's previous rules can have a profound impact on the single-family and multifamily mortgage markets, although we often disagree with the agency on how to interpret and enforce the regulations. There is a possibility.”
We will continue to monitor and report on updates on litigation arising from challenges to CFPB rules and further guidance from the CFPB.
