Manatt Partner and Leader of Consumer Financial Services Practice Scott Pearson was quoted in American Banker about a decision by the U.S. Court of Appeals for the 5th Circuit that could have broad implications, potentially opening the Consumer Financial Protection Bureau’s past rules and other actions up to legal challenges.
The ruling said the CFPB’s funding source, which comes from the Federal Reserve’s operating budget rather than congressional appropriations, is a violation of the separation of powers and gives the executive branch too much control of a federal agency.
"The real battle here is something has to be done by Congress," Pearson said. "It's a pretty Draconian ruling. If the bureau does not have constitutional funding, then everything that flows from its activities are invalid."
Pearson said the CFPB will try to get the decision stayed and pursue other options, but “there’s chaos right now” inside the Bureau.
Subscribers can read the full American Banker article here.