WASHINGTON—An appellate court ruling that the U.S. Consumer Financial Protection
Bureau is unconstitutionally funded could undermine the agency’s work over its nearly 12 years of existence, legal experts said, including rules that ensure smooth functioning of the $13 trillion mortgage market.
“A payday lender in Louisiana or Texas could go to a court and say I want you
to enjoin the CFPB from examining me, and I don’t know how a lower court could avoid agreeing with that given this opinion,” said Adam Levitin, a law professor at Georgetown University.”
The decision, by a three-judge panel of the Fifth U.S. Circuit Court of Appeals in
New Orleans, is the latest blow to hit the consumer financial regulator that has long been politically polarizing.
If upheld, the decision would impede the bureau’s ability to operate effectively, said Joann Needleman, a partner at the law firm Clark Hill PLC in Philadelphia. “It’s going to cause havoc, it’s going to cause a lack of clarity and massive confusion,” she
said.
The ruling could upend an array of current regulations and invite challenges to new rules from the agency, including planned restrictions around checking account overdraft fees and lending to small businesses.
Wednesday’s decision said the CFPB’s funding structure violated the Constitution’s doctrine of separation of powers, which sets the authority of the three branches...
Read More:
Subscription May BeRequired
