by Paige S. Fitzgerald and Alan Wingfield
In a letter dated July 29, addressed to Richard Cordray, Director of the Consumer Financial Protection Bureau, two Republicans – Representative Jeb Hensarling, Chairman of the House Committee on Financial Services, and Mike Crapo, Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs – continue to question the validity of the CFPB’s actions during the time Cordray was a recess appointee. In their letter, they ask for extensive documentation from Cordray “to get a complete and proper accounting of the CFPB’s exposure to legal challenges” and “to understand how past Bureau regulations and actions may be affected by the National Labor Relations Board (NLRB) v. Noel Canning decision.”
The letter appears to be an attempt to reopen the authority of the CFPB to take certain actions only upon the confirmation of its director. This issue apparently was settled by the Senate’s confirmation of Cordray on July 16, 2013, and subsequent ratification by Cordray of actions taken prior to his confirmation, discussed here and here. The letter attempts to leverage the decision of the U.S. Supreme Court’s case of NLRB v. Canning to raise questions about the validity of actions taken prior to Cordray’s confirmation.
In Canning, the Supreme Court held that President Obama exceeded his recess appointment authority when he filled three vacancies on the National Labor Relations Board on January 4, 2012. While Cordray’s recess appointment as CFPB Director was not at issue in Canning, his appointment was made on the same day and through the same assertion of recess appointment authority as the NLRB appointments, which were held to be invalid. Because the CFPB is an independent agency similar to the NLRB, the letter states that the Supreme Court’s decision in Canning could determine the outcome of certain decisions made by Cordray during his tenure as CFPB Director.
Specifically, the letter cites two primary legal questions regarding Cordray’s authority to carry out actions as CFPB Director: First, that CFPB actions taken during the time of Cordray’s recess appointment may be invalid; and second, that Cordray’s ratification of past CFPB actions taken during his 2011-2013 tenure also may be invalid. For example, as the letter explains, this could mean that the CFPB’s first enforcement action filed in July 2012 alleging unfair, deceptive, or abusive acts or practices (UDAAP) may not be valid, as the action involved the exercise of a new agency power.
In their letter, Republicans Hensarling and Crapo requested that the CFPB provide the following:
Cordray was requested to provide documents and materials responsive to these requests by September 1, 2014.
Based on the prior history of the CFPB, it is doubtful that Cordray will literally comply with these requests. However, Congressional efforts to impose restrictions on, and apply pressure to, the CFPB continue to simmer, and the letter illustrates how these efforts will likely be a permanent part of the overall landscape surrounding the CFPB.
Read more at Consumer Financial Services Law Monitor by Troutman Sanders LLP.
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