Will the CFPB be prone to lawsuits now that it is up and running? An American Banker article published this week set out to find those who are most likely to call the CFPB’s actions into question now that the bureau has a director in place and can begin bringing enforcement actions as it sees fit.
The controversial recess appointment of Richard Cordray to lead the bureau has prompted many to question the agency’s early authority, with many speculating that industry groups and private companies may take the issues to court. Now, however, the issue appears more complicated.
American Banker reports:
A successful lawsuit depends entirely on whether the plaintiff has standing—or the legal right—to bring a case in court, and whether they can prove that they were harmed by some action the bureau took that it wouldn’t be able to take without a director.
That means a lawsuit will likely wait until the agency takes an enforcement action against a nonbank lender, lawyers said.
“The only people who are going to have standing in the near future are people who the bureau targets for an enforcement action, either in court or through the administrative process at the CFPB,” said Alan Kaplinsky, a partner with Ballard Spahr. “Once that happens, then the target of that enforcement action may very well have standing.”
…Financial institutions could start preparing a challenge now based on what they’ve seen in the bureau’s requests for comment, said John Elwood, a partner with Vinson and Elkins LLP and a former senior deputy in the Justice Department’s Office of Legal Counsel.
“People will have a look at the proposed regulations when they’re published and be able to decide, based on that, whether there is a basis for a challenge, so that they could have a challenge in the can ready to file on the day that the regulations are made final,” Elwood said. “I think you can say with a great deal of certainty that a challenger would be able to bring a challenge within a week.”
It’s even potentially possible a nonbank lender could move before a regulation has been finalized.
Read the American Banker article via Origination News.
Written by Elizabeth Ecker