Upcoming PHH Decision Could Revive Debate Over CFPB Director’s Appointment
As the federal circuit court in Washington, D.C. continues to ponder the constitutionality of the Consumer Financial Protection Bureau (CFPB) after oral arguments before an en banc court a few weeks ago, another case with potential implications on the position of CFPB Director Richard Cordray could reignite once the DC Circuit concludes matters in the PHH case.
State National Bank of Big Spring v. Lew is a 2012 lawsuit filed by a century-old community bank in Texas challenging the constitutionality of the single, independent director structure of the CFPB and also arguing the validity of rules promulgated by Director Cordray during the first few months of his tenure at the agency.
Cordray’s appointment as CFPB Director took a very non-traditional path. He was originally nominated to the position on July 18, 2011 by President Obama. The Senate refused to act on Cordray’s nomination (and the nominations of three members of the National Labor Relations Board), so six months later the President appointed Cordray as director during a recess of Congress using his powers under the Recess Appointment Clause. The appointments of the labor board members were challenged, and in 2014 the Supreme Court held in a unanimous opinion that those appointments violated the Recess Appointment Clause. Cordray was not a party to that lawsuit.
President Obama renominated Cordray for the post in January 2013, and the Senate finally confirmed him that summer. In between his recess appointment and Senate confirmation one year later, Director Cordray issued a series of rules concerning mortgage and lending disclosures under his authority promulgated by the Dodd-Frank Act. After confirmation by the Senate, Director Cordray published a Notice of Ratification in the Federal Register ratifying all his previous actions as a recess appointee.
More recently in the Big Spring case, the D.C. court refused to address the constitutional challenge, leaving that discussion to the PHH case still pending. The court ultimately upheld the ratification of rules promulgated during Cordray’s recess period. The decision remains a contentious one in Congress. At a hearing on the CFPB in April by the House Financial Services Committee, Rep. Sean Duffy (R- WI) again challenged the validity of Cordray’s recess appointment. As the Dodd-Frank Act replacement, the CHOICE Act, moves closer to a full House vote, the future of Director Cordray and his activities at the CFPB will remain under scrutiny. Depending on the outcome in the PHH case, calls to nullify Cordray’s actions during his recess appointment could gather even more momentum.
