Supreme Court Ruling Could Have Monumental CFPB Impact

The Consumer Financial Protection Bureau may be affected by the Supreme Court’s decision to review an appellate court case invalidating President Barak Obama’s recess appointments to the National Labor Relations Board.

Even though CFPB Director Richard Cordray’s recess appointment was separate from the three NLRB appointments, all were done on Jan. 4, 2012 using the same process. A federal appeals court ruled in January 2013 that the president violated the Constitution by making the NLRB appointments as the Senate was actually in recess.

“Should the court invalidate the NLRB appointments, the potential impact on the CFPB would be monumental,” said attorneys with Ballard Spahr in a statement regarding the Supreme Court’s agreement to review the case. “This would call into question the validity of past CFPB actions, particularly any action involving the CFPB’s exercise of authority that was newly created by the Dodd-Frank Act, and the CFPB’s ability to act in the future.”

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For the NLRB vs. Noel Canning case, the Supreme Court instructed involved parties to brief and argue “whether the President’s recess-appointment power may be exercised when the Senate is convening every three days in pro forma sessions.”

The Ballard Spahr attorneys expect the Supreme Court to release a decision by the end of 2013 or early next year.

Written by Alyssa Gerace

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  • Elizabeth,

    You state: “A federal appeals court ruled in January 2013 that the president violated the Constitution by making the NLRB appointments as the Senate was not actually in recess.”

    The court found that the Senate was actually in session. The word “not” is most likely a typo.

    But what is very surprising is that the attorneys stated: “… particularly any action involving the CFPB’s exercise of authority that was newly created by the Dodd-Frank Act….” There was no CFPB before the Dodd-Frank Act. The real issue is what actions the CFPB has taken which required that its Director be in place or those which have been approved by its Director. Those are the actions which are in question. If the Supreme Court rules as expected, the result is more like an annulment is to marriage than a divorce, meaning there never has been a CFPB Director.

  • I feel this could be an excellent move if the supreme court makes the decision to review an appellate court case invalidating President Barak Obama’s recess appointments to the National Labor Relations Board.

    Obama does what he wants and when he wants. He rules, not governs. The CFPB has to much power and autonomy, this may change the entire scene if it comes to fruition!

    The financial regulatory reform bill (Dodd-Frank) has given the Feederal Government cart blanch control over our entire financial system. The CFPB has implemented so many rules and regulations even they are forgetting which one’s they have put into effect.

    If the supreme court moves in the right direction, this may finally change things for the better. This will be a rare occasion for a change! They have effected our industry in an adverse way!

    John A. Smaldone

    • John,

      Why do you say: “I feel this could be an excellent move if the supreme court makes the decision to review an appellate court case invalidating President Barak Obama’s recess appointments to the National Labor Relations Board”? As someone who wants to take the teeth from the CFPB, if the Supreme Court does not elect to review the case, the decision of the Court of Appeals is final.

      While the so called Director, Richard Cordray may be a very good choice if the CFPB must exist in its present form, removing him would create disarray and bring chaos within the Bureau. Some will argue that disarray and chaos is never a good thing but bringing the chaos created by the actions and lack thereof by the CFPB has been very disruptive to the Financial Services industry.

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