President Joe Biden has made going after “junk fees” a key plank of his economic campaign for reelection. National Economic Council Director Lael Brainard on Wednesday tied the crusade against hidden fees to tackling inflation, one of Biden’s weakest spots with voters. “President Biden knows that prices are just too high on so many things, and he’s fighting to lower costs for American families,” Brainard said at a White House event. “One of the major drivers of those high prices are junk fees.” But the future is uncertain for one of the main stewards of that campaign, the Consumer Financial Protection Bureau. The Supreme Court is poised to release a decision any day now on the constitutionality of the agency’s independent funding stream, which was designed by Democrats to bypass the normal congressional appropriations process and insulate it from political pressure. If the high court rules against the CFPB, it will likely “kick the ball over to Congress to give them an opportunity to fashion a remedy,” said Alan Kaplinsky, former chair of the consumer financial services group at Ballard Spahr. “In addition to that, they would have to figure out what regulations should survive and what regulations should be thrown out, and that’s going to be a huge undertaking for Congress to deal with during an election year. I would predict that nothing would happen in Congress before the lame-duck session.” Republicans, many of whom have opposed the CFPB since its inception, argue that the agency’s funding scheme — it draws money from the Fed, subject to a cap set by Congress — allows it to escape accountability. Rep. Andy Barr of Kentucky has a bill to place the Consumer Bureau under annual congressional appropriations. If the court does punt the matter back to Congress, it would need to give lawmakers a deadline to sort it out, according to Leah Dempsey, co-chair of the financial services practice at Brownstein Hyatt Farber Schreck. “Congress can’t agree on much these days and is barely funding the government,” she said. “If there was no specific timeframe for them to decide a question like this, it could take years or never be decided.” The potential economic impact of a ruling against the CFPB and a protracted fight over its existing regulations is significant: A decade-plus of financial regulation could be thrown into question, upending established rules of the road. “Nobody wants a world where we have the CFPB stuck in suspended animation,” said Adam Rust, director of financial services at the Consumer Federation of America. “If we let this card topple, then we have a tsunami coming soon in the economy. If we don’t have the kinds of safe harbors that have been built into the market then we will have so many actors that don’t know how to proceed, and that will have downstream consequences.” Housing industry groups, for instance, have called on the high court to preserve existing CFPB regulations, warning of “potentially catastrophic consequences that a decision drawing those rules into doubt could have on the mortgage and real estate markets,” in an amicus brief. The agency, which polices a broad swath of consumer finance, says it has returned some $19 billion to consumers through enforcement actions. Under its hard-charging current director, Rohit Chopra, the bureau has taken an aggressive stance toward industry — cracking down on the fees banks charge, setting out new data requirements for lenders to small businesses and putting forward a controversial new anti-discrimination policy, among many initiatives that have incensed its critics. The government also argues that a ruling against the bureau could threaten other regulators, including the Fed and the OCC, that also do not receive their funding through appropriations. To be certain, plenty of court watchers expect the CFPB to prevail after even conservative justices appeared skeptical during oral arguments about payday lenders’ position that Congress’s decision more than a decade ago to shield the CFPB from the annual budget debate ran afoul of the Constitution’s clause concerning appropriations of federal money. One reason legal experts expect the high court to rule in favor of the agency is that only one justice, Sonia Sotomayor, asked a question about the potential remedy if the court were to decide the funding is unconstitutional. A ruling in the CFPB’s favor would settle the constitutional question, allowing other pending cases challenging agency regulations around the country to move forward. “It seems like there’s a good chance that the CFPB wins this case,” Dempsey said. “But that being said, oral arguments aren’t always a good indicator of the final outcome, and we won’t know for sure until we see the decision.”
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