Pearson Quoted in American Banker and Law360 on CFPB Funding Case in SCOTUS

Five issues to watch in CFPB's Supreme Court constitutionality case
– American Banker

Manatt Consumer Financial Services Leader Scott Pearson was quoted in American Banker and Law360 on a case currently before the U.S. Supreme Court over the validity of the Consumer Financial Protection Bureau’s funding source. 

At issue is a Fifth Circuit ruling that the statute providing funding to the CFPB through the Federal Reserve violates the appropriations clause of the Constitution. Before oral argument, Pearson told American Banker the Supreme Court may hesitate to find a separation of powers issue because of potential far-reaching effects on other agencies.   

"The only thing that might cause the court some pause in finding a separation of powers problem here is the idea that all the other banking agencies might be impacted in the same way," Pearson said. "There's going to be concern about that and the court might hesitate to rule in a manner that might affect more than just the bureau." Pearson went on to say that the Court could distinguish the funding of other agencies on the basis that it is coming only from the entities they regulate, and also because “[t]he bureau has much broader authority [than other banking agencies] and broad police powers.”  

In a Law360 article after the first round of oral arguments, Pearson said the Bureau seemed to fare better than expected, and that “[m]any of the questions [from the bench] suggested that the Fifth Circuit may get reversed." 

However, even if the CFPB wins this case, Pearson said other challenges to the Bureau’s authority are coming. From the industry's perspective, "the biggest issue with the CFPB these days is its use of guidance and UDAAP authority to basically act like a legislature, which it's not," Pearson said, referring to the agency's authority to police unfair, deceptive and abusive acts and practices. "I think you're going to see quite a lot of challenges in that area based on the major questions doctrine," he added. "That's where the bureau has its biggest problems aside from this appropriations issue." 

Subscribers can read the full American Banker article here and the Law360 article here



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