Washington Watch: Big business may get more than it bargained for with conservative assault on regulators

by | Oct 28, 2022 | Stock Market

A federal appeals court struck a significant blow to the Consumer Financial Protection Bureau when it ruled last week that its funding structure is unconstitutional, potentially putting the very existence of the agency at risk. The decision is a victory for Republicans and a conservative movement dedicated to dismantling the regulatory state, but their allies in the business community are more ambivalent about the potential effects of a decision that could undermine a host of regulations — and legal safe harbors — that the industry has planned around for more than a decade.

“Uncertainty is the word of the day,” said Jonathan Kolodziej, a partner at the law firm Bradley, who advises financial services companies
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on regulatory compliance. “As much of a thorn the CFPB may be in the sides of companies, we have at this point invested so much time and effort to get to where we are,” he added. “To just wipe that away would only add more burden and uncertainty to the situation.” The court’s decision invalidated a 2017 rule that regulates the payday lending industry on the basis that the CFPB’s funding structure is unconstitutional. The agency is funded by the Federal Reserve, which is in turn funded by fees assessed on depository institutions and by interest earned on its securities portfolio. “Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers,” Judge Cory Wilson wrote for the panel of three Trump-appointed judges who heard the case. The decision is only binding in federal courts in Texas, Louisiana and Mississippi, for the time but the SEC is expected to appe …

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