The Consumer Financial Protection Bureau is moving full steam ahead with guidance and compliance efforts after a federal appeals court ruled its funding mechanism unconstitutional.

The three-judge panel on the U.S. Court of Appeals for the 5th Circuit ruled that the Consumer Financial Protection Bureau's, or CFPB's, funding structure, in which it receives funding from the Federal Reserve, violates the Constitution's structural separation of powers.

The CFPB is expected to appeal the decision, and the case could reach the U.S. Supreme Court, but its journey through the courts will be complex and could take as long as two years, industry experts said. If upheld, the ruling could have a massive impact on all the guidance and enforcement efforts the agency has promulgated since its inception, according to attorneys and analysts.

However, the CFPB, which has intensified its regulation of financial institutions under Director Rohit Chopra, is pushing ahead with its agenda. One week after the court's Oct. 19 ruling, the agency unveiled a crackdown on so-called "junk fee practices" that stands to fundamentally change the way banks can impose overdraft fees and depositor fees.

"The guidance is a reminder that Director Rohit Chopra doesn't plan to sit around and wait for questions about the CFPB's legal authority to play out in the courts," Ian Katz, managing director at Capital Alpha Partners, said in an Oct. 26 note.

The agency quickly followed its "junk fee" guidance with an Oct. 27 announcement outlining options to strengthen consumers' access to, and control over, their financial data in what the agency said is a first step before issuing a proposed data rights rule.

The two announcements bolster analysts' and attorneys' beliefs that the banking industry should not expect the CFPB to slow its agenda, despite a ruling that could threaten its funding and its entire range of activities.

"Our sense is that the structural consequences if this decision holds could lead CFPB Director Rohit Chopra to redouble his enforcement and rulemaking efforts," BTIG analyst Isaac Boltansky said in a note prior to the agency's most recent guidance. "This decision does not alter our near-term expectations for a more aggressive enforcement agenda, targeted rulemaking, and a full embrace of public jawboning."

Will the ruling impact the agency's previous guidance?

The decision could have enormous implications for the CFPB if it is upheld, with a "potential impact on all rules and guidance that the CFPB has issued, as well as on any other actions the CFPB has taken based on its Unfair, Deceptive, or Abusive Acts or Practices ... or other authority … including existing enforcement orders," Ballard Spahr attorneys Alan Kaplinsky, Michael Gordon, and John Culhane co-wrote in an analysis posted Oct. 20.

But as a potential appeals process plays out, "I would expect the agency to seek to stay the effectiveness of the decision pending further appeal," Gordon told S&P Global Market Intelligence in written comments shortly following the ruling.

As such, companies should continue on a careful path.

"While this drama plays out, companies would be well served to not relax their focus on the day-to-day task of compliance," law firm Buckley LLP said in an Oct. 20 alert.

State attorneys general, the Federal Trade Commission and other regulators will continue to partner with the CFPB on enforcement efforts, the law firm said, and companies should presume the agency's other rules continue to be valid for enforcement purposes.

Jeff Ehrlich, a partner at the law firm McGuireWoods and former deputy enforcement director at the CFPB, agreed that the 5th Circuit panel decision may complicate the bureau's enforcement work in the near term, but it will not stop it.

"The career staff in enforcement are professionals. As they've dealt with similar challenges in the past, I expect that they'll keep their heads down, ignore the noise and move forward with their cases," he told Market Intelligence in an interview.

Will the decision stand?

Over the longer term, if a potential appeal reaches the Supreme Court, the current composition of the nation's highest court "suggests that the 5th Circuit's reasoning could stand, which would push the bureau into the congressional appropriations process," according to Boltansky.

While the CFPB would still be funded if that happens, its power could be diminished and the agency could face budget cuts and possible legislative riders that could "narrow the scope of its ambitions," Boltansky said.

Republican legislative efforts to reduce the power of the CFPB will continue as the case winds its way through the courts. The three-judge panel ruling was welcomed by GOP lawmakers who have actively pushed bills to subject the agency to more congressional oversight.

"With this ruling, the bureau will no longer be able to rely on their annual blank check from the Federal Reserve, but rather be subjected to the necessary congressional supervision and level of transparency the American people expect from a government agency," Rep. Blaine Luetkemeyer, R-Mo., said in a statement. Luetkemeyer is the ranking member on the Consumer Protection and Financial Institutions Subcommittee, part of the House Financial Services Committee.

In the meantime, the decision of the 5th Circuit panel could open the door for more lawsuits from other parties challenging the constitutionality of the agency's funding, Chris Willis, co-leader of the Consumer Financial Services Regulatory Practice at Troutman Pepper, said in an interview.

"It may generate a lot of litigation in other circuit courts," Willis said. The judicial path could become more complicated if decisions are reached in those courts before the 5th Circuit case reaches its final conclusion, he said.