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CFPB Faces Crucial Supreme Court Decision on Funding in 2024

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) is reportedly set to face a crucial year in 2024 as the Supreme Court’s decisions loom over its plans to reshape the banking industry’s handling of customer data and fees.

The CFPB, under the leadership of Director Rohit Chopra, has been working on finalizing rules that would make it easier for consumers to share their financial data, switch banks, and have caps on credit card fees, Bloomberg Law reported Wednesday (Dec. 27).

However, the CFPB’s efforts are overshadowed by two key Supreme Court cases that could have a significant impact on the bureau’s future, according to the report.

The first case challenges the CFPB’s independent funding mechanism through the Federal Reserve, while the second case could make it easier to challenge any federal agency’s rules in court, the report said. The court’s rulings in these cases will determine the fate of the CFPB and its rulemaking authority.

One of the cases before the Supreme Court challenges the CFPB’s independent funding mechanism, which currently allows the bureau to request money directly from the Federal Reserve, per the report. The Fifth Circuit Court of Appeals found this funding mechanism to be in violation of the Constitution’s appropriations clause. However, there is speculation that the Supreme Court will not deem the CFPB’s funding unconstitutional.

A ruling in favor of the CFPB would revive its long-awaited rule to restrict payday lenders’ access to customer bank accounts, according to the report.

The Supreme Court’s conservatives could also use a separate case to limit the power of federal regulators by overturning the Chevron deference doctrine, the report said. This doctrine requires judges to defer to expert regulatory agencies’ interpretations of ambiguous statutes. Overturning Chevron deference would open up challenges to many existing regulations, including those issued by the CFPB.

In addition to these legal challenges, the CFPB has been working on implementing rules that would require banks to allow customers to easily transfer their financial data to third-party companies, known as the open banking rule, per the report.

The CFPB also plans to subject the largest digital payments providers and digital wallet operators to direct supervision by agency examiners, according to the report.

The CFPB is also considering new regulations to limit bank fees for overdrafts and insufficient funds, as well as an overhaul of implementing rules for the Fair Credit Reporting Act, the report said.

The Supreme Court is likely to rule on the ways in which the CFPB is funded, as well as the very constitutionality of the agency, during the spring term, PYMNTS reported on Dec. 20.