Manatt Consumer Financial Services Leader Scott Pearson was quoted in Law360 about an expected influx of financial services litigation and enforcement activity following the U.S. Supreme Court’s decision to uphold the Consumer Financial Protection Bureau’s (CFPB) funding source.
The decision comes after a legal battle challenging the constitutionality of the CFPB’s funding coming directly from the Federal Reserve rather than going through the appropriations process. In a 7-2 decision, the Supreme Court sided with the CFPB, allowing the agency to resume enforcement actions and investigative efforts, which Pearson said will embolden the Bureau to take action.
“To the extent there was any restraint in place due to the threat of a finding that the bureau's funding mechanism is unconstitutional, I think that the gloves are going to come off now,” Pearson said.
The Supreme Court’s decision does not eliminate all avenues for the financial industry to push back on the CFPB’S regulatory actions, with both the major questions doctrine and the nondelegation doctrine offering routes for litigants to challenge the CFPB’s authority to prohibit unfair, deceptive and abusive acts or practices.
“There's no question that there will continue to be a lot of litigation over whether the bureau has authority to take certain types of actions,” Pearson said. “The major questions doctrine, I think, will be the primary vehicle for bringing those challenges.”
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