A Response to Professor Adam Levitin in regards to the Fifth Circuit Opinion in Group Monetary Providers Affiliation of America, LTD v. CFPB

Regardless that I usually disagree with Professor Levitin’s opinions and coverage positions about shopper monetary providers developments, I preserve excessive respect for him as a result of he’s very educated on this space. Shortly after the Fifth Circuit held that the CFPB was unconstitutionally funded and invalidated the Payday Mortgage Rule, Adam revealed a weblog on Credit Slips wherein he introduced a bunch of explanation why he believes that the case was wrongly determined. Though I’m not going to say on this weblog whether or not I agree with the Fifth Circuit’s reasoning or Adam’s critique (in any case, the one factor that issues here’s what the Republican-dominated Supreme Courtroom thinks and, maybe, what Congress ought to do to avoid wasting the CFPB if the Supreme Courtroom affirms), I’ll acknowledge that he articulated a extra persuasive argument than the CFPB did in its briefs within the Fifth Circuit and in its more recent briefs in supplemental filings it has made in other pending cases after the Fifth Circuit resolution got here down. If this was a moot courtroom argument, Adam would win it arms down.

On October 28, Adam revealed an op-ed within the American Banker entitled “Those Seeking to bring down the CFPB should be careful what they wish for” (article behind paywall).  In his op-ed, he makes the in terrorem argument that an affirmance of the Fifth Circuit opinion will result in chaos. Though I can’t quote his total article, let me quote a few the identical excerpts from the article quoted just lately by the Consumer Law & Policy Blog (October 29, 2022):

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Take into account a mortgage lender that should make disclosures when making a mortgage. For years that lender has been utilizing the disclosure types promulgated by the CFPB, figuring out that utilizing them shields it from legal responsibility. If the company is unconstitutional, using these types ceases to supply any authorized safety.

Likewise, the CFPB’s Certified Mortgage protected harbor from the Dodd-Frank Act’s ability-to-repay requirement will disappear if the CFPB is unconstitutional, triggering quick legal responsibility on lenders’ warranties to buyers that the mortgages they bought them have been certified mortgages. Each financial institution that fees an overdraft payment will instantly be breaking the legislation, as a result of overdraft charges are exempted from value of credit score disclosures by advantage of CFPB regulation.

Whereas I agree with Adam that a big a part of the patron monetary providers business ought to be cautious to not throw out the newborn with the tub water, there’s a path ahead which may end in saving the CFPB and the regs (apart from the Payday Mortgage Rule) which it has promulgated throughout its greater than 11 yr life. One apparent strategy to accomplish that’s for the Supreme Courtroom to affirm the Fifth Circuit, however make its order potential solely. Because it has finished on different events up to now, it in all probability would keep its mandate for some affordable time frame to permit Congress to right the funding downside. Whereas I don’t have quite a lot of confidence in Congress, I feel that there could be robust bipartisan help to retain the CFPB and most, if not all, of its regs and enforcement actions, so long as Dodd-Frank is amended to require funding by Congressional appropriations and governance by a 5-member Board of Administrators as an alternative of a single director. Hopefully, nonetheless, a part of that course of, Congress would possibly very effectively overturn among the quite a few opinions, circulars, coverage statements, and so on. which aren’t full-blown regs.  As readers of this weblog know, I have been very critical of Director Chopra’s penchant for issuing unanticipated and controversial “guidance” by fiat rather than by rule making pursuant to the Administrative Procedures Act. Some of the egregious examples of that was his amendment of the UDAAP Exam Manual to broaden the definition of the “unfairness” prong to incorporate discrimination (together with disparate impression) in a fashion that goes effectively past the attain of the Equal Credit score Alternative Act and the Federal Honest Housing Act. This spawned a lawsuit in opposition to the CFPB difficult the motion by the U.S. Chamber of Commerce and financial institution commerce associations.