Looking Ahead to 2024
The Supreme Court continues to take a close look at major administrative law questions, and its answers have the potential to significantly affect the consumer finance industry. Most notably, in 2023, the Supreme Court heard oral argument in a case concerning the constitutionality of the CFPB's funding mechanism and in two other cases questioning the continued vitality and scope of the Chevron doctrine, which could significantly affect agencies' rulemaking and the judicial review of agency decisions. In 2024, the U.S. Courts of Appeals will also consider issues that will undoubtedly affect the consumer finance industry, including major decisions regarding the Equal Credit Opportunity Act's prohibition against redlining and the FCRA's furnisher requirements.
In the News
U.S. Supreme Court
Supreme Court Clears Way for Constitutional Challenges to Agency Structure
In April, the U.S. Supreme Court concluded that federal district courts have jurisdiction to consider constitutional challenges to the SEC and the FTC's structure and constitutionality in Axon Enterprise, Inc. v. Federal Trade Commission, 598 U.S. 175 (2023). In other words, these constitutional challenges do not fall within the scope of the statutory review schemes laid out in the Securities Exchange Act and Federal Trade Commission Act'which generally provide that a party must make its claims first within the agency itself before the party may raise its claims in a federal court of appeals'and accordingly may be brought in federal district courts for immediate review. In reaching this conclusion, the Court reasoned that judicial review of the parties' structural constitutional claims would not be meaningful if the parties were required to submit to agency proceedings beforehand, the parties' challenges went to the agencies' power to proceed in the first instance and not to specific agency actions, and the parties' claims fell outside of the agencies' expertise. With this ruling, parties subject to agency proceedings may raise constitutional claims immediately in district court, instead of waiting until the often-lengthy and resource-intensive agency proceedings conclude.
Supreme Court Requires Stays During Interlocutory Appeals from Denials of Motions to Compel Arbitration
In June, the Supreme Court held in Coinbase, Inc. v. Bielski, 599 U.S. 736 (2023), that district courts must stay their pretrial and trial proceedings while an interlocutory appeal on arbitrability remains pending. Courts of appeals had been split as to whether staying district court proceedings during an interlocutory appeal in these circumstances was required. The Supreme Court's decision ensures that the parties'and, indeed, district courts'do not expend unnecessary time and resources continuing to litigate the dispute in federal court only for the appellate court to conclude that the dispute should be arbitrated instead.
Supreme Court Hears Argument in Challenge to CFPB's Funding Mechanism
In October, the Supreme Court heard argument in CFPB v. Consumer Financial Services Association of America, Ltd., No. 22-448, on whether the CFPB's funding mechanism violates the U.S. Constitution's Appropriations Clause because it does not receive funding directly from congressional appropriations and instead receives funding from the Federal Reserve. Throughout its argument, the CFPB highlighted that its funding structure is not unprecedented and that Congress has previously approved similar standing appropriations for other agencies. The Supreme Court's decision in this case is expected by June 2024. Until this issue is resolved, several federal courts have stayed proceedings in cases, including enforcement actions, in which the CFPB is a party pending the Supreme Court's decision.
Supreme Court Hears Argument in Challenge to SEC's Use of Administrative Law Judges
In November, the Supreme Court heard argument in SEC v. Jarkesy, No. 22-859, a case that involves a challenge to the constitutionality of the SEC's use of administrative law judges and could have a significant impact...
