Another important aspect of the CFPB case may involve potential legislation in Congress. As we noted in previous articles, sometimes the amount and vigor of public comments on a Supreme Court case may lead to legislation in Congress. This case was a subject of a lot of debate.
A recent opinion from the Supreme Court on a regulatory agency’s funding could resolve some questions over the future of regulation of the retirement planning industry. As we’ve written before, the case before the Supreme Court concerning the CFPB might at first seem to have only minimal or tangential implications for financial advisors, mostly in how associate financial institutions could be regulated with regard to consumer banking and credit scores. Yet, the CFPB case involves much more than that.
In an opinion showing a surprising level of unity in an often divided court, the Supreme Court issued a 7-2 majority opinion holding that the CFPB’s funding structure was permissible.[1] This may be a favorable clue as to how the Court will rule in other cases that may more directly influence regulators of the retirement planning industry. “The case was one of several on the court’s docket this term involving the division of authority between the three branches of government, as well as the power of administrative agencies.”[2] As we have noted before, administrative agency authority is a source of tension. Rulings on one agency may signal limits on others that regulate plans and plan sponsors.[3] The ruling in favor of the CFPB may seem to allow the kind of broad authority that regulators such as the DOL and SEC have over the everyday practices of financial advisors. Many analysts and experts in the regulatory field are closely watching the cases involving the Chevron Doctrine of Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce.
It may be that the CPFB case does not foretell a ruling in favor of agencies as much as some think but may be more closely tied only to Congress’s abilities to create agencies. In the 2022 case of AMG Capital Management, LLC v. Federal Trade Commission, the Supreme Court sent a case back to the lower court to reconsider when it found that the Federal Trade Commission’s collection of $1.27 billion in fees from an alleged payday lender went beyond that executive agency’s powers. Since that case more directly involved the extent of the agency’s powers, not the extent of Congress’s powers, the opinion in CFPB may not be as positive as one might thing.
Another important aspect of the CFPB case may involve potential legislation in Congress. As we noted in previous articles, sometimes the amount and vigor of public comments on a Supreme Court case may lead to legislation in Congress. This case was a subject of a lot of debate. And sometimes legislation is introduced to remedy issues not resolved in court. We noticed that in response to their defeat in court, many who opposed the CFPB have mentioned bills to curtail the CFPB’s powers.
One such bill mentioned in reviews of the CFPB case is HR 2789, sponsored by Representative Andy Barr of Kentucky. That bill would remove “the bureau from the Federal Reserve System and reestablishes it as an independent agency. The bill also changes the leadership structure by establishing a five-person commission led by a chair rather than a director as under current law. The bill eliminates the bureau's ability to receive funding through transfers from the Federal Reserve and brings the bureau under the regular appropriations process.” By moving the CPFB into the appropriations process, Congress may be able to curtail the agency’s agenda and regulatory efforts.[4] The bill received legislative attention in 2023 but has languished on the floor of the House of Representatives since December of 2023.
Whichever way the Court rules in the Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce cases is clear that the topic of the authority of regulatory agencies is under considerable scrutiny currently. Advisors may want to consider discussing how their practices would change with their compliance counsel if regulatory agencies had less power.
[1] https://www.oyez.org/cases/2023/22-448
[2] https://www.scotusblog.com/2024/05/supreme-court-lets-cfpb-funding-stand
[3] https://www.bcgbenefits.com/blog/consumer-protection
[4] https://www.congress.gov/bill/118th-congress/house-bill/2798
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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