Richard Cordray, CFPB director. (Photo: Diego M. Radzinschi)

Although the impact of this week’s appeals court ruling that found the CFPB’s structure to be unconstitutional are still being assessed, attorneys said agency officials are likely to be looking over their shoulders as they write rules affecting the financial services industry. 

First, unless the agency petitions for a rehearing or attempts to take the case to the U.S. Supreme Court, the CFPB is likely to be required to submit all proposed rules to the Office of Management and Budget for its review, according to Alan Kaplinsky, chair of the Consumer Financial Services Group at Ballard Spahr.

“The only question, in my mind, is whether any existing, final regulations will need to be run by OMB,” he said, adding that he is certain that this is just one of the elements that the White House and the CFPB are trying to sort out.

A federal appeals court on Tuesday ruled that the organization of the CFPB is unconstitutional since it is operated by a single person who is not answerable to anyone, but the court said that the agency may continue to operate. 

The bureau will operate as a federal agency whose director is supervised and may be removed by the president, according to the court ruling. 

“The CFPB already is required to submit proposed rules that have a significant impact on small businesses to a small business review panel, which includes OMB officials,” said Leah Dempsey, CUNA’s senior director for advocacy and counsel.

She added, however, that there are concerns that the CFPB does not take that process seriously enough. She cited a strongly worded letter written by the Small Business Administration’s Office of Advocacy concerning the CFPB’s controversial payday lending rules. 

In that Oct. 7 letter, the SBA said that the CFPB underestimated the impact the payday rules would have on small business. 

 “Advocacy is concerned that the economic impact of the proposed rule on small entities and consumers may be greater than what is indicated in the CFPB’s Regulatory Flexibility Act (RFA) analysis,” the letter states. “Advocacy encourages the CFPB to reevaluate the economic impact in RFA section of the proposed rule and consider less burdensome alternatives for small entities.”

The SBA singled out the impact the rules would have on credit unions. 

“The proposed rule adds unnecessary complexity and new compliance burdens to consumer friendly credit union small dollar loans,” the letter states.

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