All eyes in the collection and financial services industry will be on Washington, D.C., tomorrow, specifically the building located at One First Street, where the nine justices of the Supreme Court will hear arguments that could fundamentally alter the trajectory of how companies are regulated.
You can hear arguments in Consumer Financial Protection Bureau v. Community Financial Services Association on Tuesday, October 3 by clicking here. There are no videos of the proceedings, unfortunately. Proceedings will start around 10 a.m. ET. The crux of the case is for the Supreme Court to determine whether the funding structure that provides the CFPB with its operating budget is constitutional or not. When it was enacted, Congress wanted the CFPB to be independent and not subject to the whims of Congress, so the CFPB gets its funds directly from the Federal Reserve Board. Most federal agencies must receive their funds from Congress, which approves their budgets. The CFSA is attacking that premise, saying the funding structure is unconstitutional.
The Supreme Court’s ruling — which is not expected until 2024 — could have wide-ranging implications not just for the CFPB, but other “independent” regulators and programs funded by the federal government, like Social Security and Medicare.
While this not the first time the Supreme Court has been asked to weigh in on the structure of the CFPB — back in 2020 it issued a ruling allowing the Director of the agency to be fired for any reason, not just for cause. That ruling paved the way for Rohit Chopra to replace Kathy Kraninger when President Joe Biden was inaugurated in 2020.
Should the Supreme Court determine the funding structure of the CFPB is unconstitutional, it could offer several alternatives, from invalidating everything the agency has done since its inception to sever the funding provision from the rest of the law that created the agency.
“Nobody wants a remedy where they throw every regulation out the window, and I doubt very much if they would do that,” said Alan Kaplinsky, former chair of the consumer financial services group at Ballard Spahr, in a published report. “If they get to the point where they’ve got to decide the remedy, I think the conservatives and the liberals on that court would prefer to kick the ball over to Congress and let them try to deal with that.”’
