CFPB Shields Rules From Challenges After Supreme Court Decision

The Consumer Financial Protection Bureau ratified nearly all of its regulations and other communications, protecting them from legal challenges after the Supreme Court said the agency’s leadership structure was unconstitutional.

CFPB Director Kathleen Kraninger’ ratification Tuesday comes after the Supreme Court’s June 29 decision in Seila Law v. Consumer Financial Protection Bureau.

A 5-4 Supreme Court majority found that the CFPB’s original leadership structure, which gave the bureau’s director for-cause removal protections, was unconstitutional. The Supreme Court severed out that provision in the 2010 Dodd-Frank Act, giving the president the power to fire the CFPB director for any reason.

The decision clarified the status of the CFPB’s future actions, but left open questions about whether the bureau’s actions prior to the Supreme Court’s ruling were constitutionally valid.

Kraninger’s move to ratify nearly all of the CFPB’s regulatory actions—including those undertaken by former Director Richard Cordray, an Obama-era appointee—is intended to end those questions and head off potential court challenges from companies.

“The bureau is taking action to ensure that consumers and market participants understand that the same rules continue to govern the consumer financial marketplace,” Kraninger said Tuesday in a statement.

Some Exceptions

The CFPB didn’t ratify a July 2017 rule that outlawed mandatory arbitration clauses in consumer financial contracts. The rule was overturned later that year by Congress and the Trump administration under the Congressional Review Act.

Kraninger also didn’t ratify the CFPB’s October 2017 payday loan rule. The CFPB on Tuesday released a new final payday loan rule that rescinded ability to repay requirements of the 2017 rule, but kept restrictions on payday lenders’ ability to access borrower bank accounts for payments. Kraninger only ratified the payments portion of the 2017 rule in Tuesday’s action.

The CFPB didn’t ratify active or completed enforcement actions in Tuesday’s move

The CFPB’s statement said it wasn’t necessary for the ratification “to include various previous bureau actions that have no legal consequences for the public, or enforcement actions that have been finally resolved.”

The CFPB said it was considering ratification of pending enforcement actions separately.