On October 19, the U.S. Court of Appeals for the Fifth Circuit ruled that the funding structure of the Consumer Financial Protection Bureau is unconstitutional, as it violates the separation of powers clause because it occurs outside the congressional appropriations process. Jay Beitel, one of the nation’s top legal authorities on residential mortgage lending, noted that if the Fifth Circuit’s ruling stands, it could open the floodgates to vacate all rules made by the CFPB since its inception, and that the mortgage lending industry may be thrown into regulatory chaos.
“If this decision stands, at a minimum, it could open the floodgates for cases seeking an order to vacate all of the promulgated rules made by the Bureau since its inception because those rules, like this Payday Lending Rule, were adopted in the same manner by the Bureau,” Beitel said. “If that happens and the Mortgage Lending Regulations are vacated, then the regulations will revert to those in effect before October 2015.”
Jay’s commentary was featured in several prominent trade media outlets, including:
- Mortgage News Network: Do CFPB Rules Stand If The Agency’s Budget Is Unconstitutional?
- Mortgage News Network: Court Filings and Some Good News
- American Banker: What happens when the CFPB’s funding question hits the Supreme Court?
- The Chrisman Commentary: 11.17.22 Agency Guarantee Fees; Jay Beitel on the Constitutionality of the CFPB; Strong Retail Sales