By Ray Birch
WASHINGTON—Another expert believes the Supreme Court decision upholding the constitutionality of the funding structure of the CFPB will only embolden an already “aggressive” regulatory agency.
As CUToday.info reported earlier, America’s Credit Unions has already said it expects the Supreme Court ruling will lead it to step up its enforcement and rulemaking. Now, Brandy Bruyere, a partner at Honigman, LLP., is seconding that opinion and offering a forecast for the potential near-term effects of the ruling.
Bruyere said the agency is already showing signs of an even more aggressive rulemaking stance.
“The CFPB will be emboldened, and I think there's some evidence of that just this past week,” Bruyere said in late May. “With the Bureau coming out with this interpretive rule saying buy now, pay later loans are a credit card product… They didn't put that on their rulemaking agenda. They didn't put that out for notice and comment.”
Bruyere pointed out that CFPB Director Rohit Chopra, in recent remarks before the Mortgage Bankers Association, “really went after the consumer reporting agencies, saying that how consumers might have to pay for multiple consumer reports when they're shopping for a mortgage loan, how that might be a junk fee, and how that adds to the cost of a mortgage. That was interesting to me. It was a pretty aggressive speech.”
No Longer on Hold
Bruyere pointed to four CFPB rules that have been on hold due to legal challenges.
“First there's the credit card late fee rule,” Bruyere said. “I think it was published in March, and almost immediately it was challenged in court. A federal court had issued a preliminary injunction pausing this rule, with the injunction largely relying on the debate over whether the CFPB’s funding mechanism is constitutional. Now, what we'll probably see here is plaintiffs going to the court asking for the injunction to remain in place based on their other substantive arguments, like this is not an appropriate rulemaking. And then, we might see the CFPB ask the court to dismiss the lawsuit, as well, saying there's nothing to see here.”
Rule Two
The second rule effected, according to Bruyere, is the small business lending rule, which is sometimes called the “small business data collection rule.”
“I've seen it called the HMDA rule for small business. because it requires business loans to collect a lot of demographic data and other information, much like we do with most mortgages right now,” Bruyere said. “This one was also subject to a nationwide injunction that provided this preliminary pause on the rule. And the timing for this was tied to the Community Financial Services Association of America versus CFPB decision, saying let's pause this rule while we let the Supreme Court figure out if the CFPB is constitutional.”
As a result of that injunction, the CFPB was also required to extend the deadlines for compliance with the rule, which the Bureau did shortly after the Supreme Court's holding ruling came out, Bruyere explained.
“Here we expect plaintiffs will continue to litigate whether the rule is otherwise invalid, calling the rule arbitrary and capricious,” Bruyere said. “We did see the CFPB file what's called a motion for summary judgment, basically meaning a request for the court to rule in its favor as a matter of law, without any further litigation on the facts of the case.”
Brandy Bruyere
Rule Three
The third case affected, Bruyere said, is the UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) supervision manual litigation.
“Another pending lawsuit, that some of us might have forgotten about, is a case challenging the CFPB's position that any discrimination in a deposit product, or any financial product, is a violation of the Unfair, Deceptive, or Abusive Acts or Practices section of its supervision and exam manuals. A federal court had ruled in favor of plaintiffs here who said this guidance should have gone through the formal rulemaking process,” Bruyere explained. “But again, when issuing this injunction, the court ruled that the CFPB's funding was unconstitutional and the appellate court issued a stay, basically saying, again, we're going to put this on hold until we see what the Supreme Court says.”
Rule Four
The final rule that has been held up is the Supreme Court case regarding the CFPB’s payday loan rule, which was also put on hold pending the outcome of the decision on constitutionality, Bruyere noted.
Now What?
So, what’s ahead for the CFPB and what can credit unions expect?
“I think we need to just be watching what the CFPB is going to do with their new rulemaking agenda, which will come out in about a month, by my estimate,” she said. “I'll be very interested to see whether that list got longer.”
Bruyere said she believes the recent decision on the CFPB’s funding structure will shift further litigation efforts to try and curb the CFPB’s power. She also thinks that with it being an election year—which could result in a possible power shift in D.C.—that is also affecting the CFPB’s rulemaking decisions.
“I think one of the reasons they put out this interpretive buy now, pay later rule would be to cut off the time frame for when there could be a Congressional Review Act challenge to the interpretive rule, where Congress could overturn the rulemaking,” Bruyere said. “If they publish it now, the clock would run out before we have a new Congress.”