CFPB safe until March 2016

Posted on 11/13/2015 at 09:05 AM by John Lande

This is the first in a three-part blog series on the CFPB. This blog has recently covered a decision from the United States Court of Appeals for the District of Columbia that revived a challenged to the constitutionality of the CFPB and the rules it has promulgated. After the DC Circuit's ruling, the court remanded the case back to the district court to decide two remaining issues. First, the district court will decide whether Congress unconstitutionally granted the CFPB too much authority. Second, the district court will have to decide whether rules promulgated while the CFPB's director, Richard Cordray, was not confirmed by the Senate are valid. The parties have agreed to the following schedule to submit briefs and arguments to the district court:

  • November 6, 2015: Bank's motion for summary judgment and memorandum in support (45 pages).

  • December 21, 2015: CFPB's cross-motion for summary judgment and consolidated memorandum in support of CFPB's cross-motion for summary judgment and in opposition to Bank's motion for summary judgment (50 pages).

  • February 4, 2016: Bank's consolidated memorandum in opposition to CFPB's cross-motion for summary judgment and reply in support of Bank's motion for summary judgment (45 pages).

  • March 7, 2016: CFPB's reply in support of CFPB's cross-motion for summary judgment (30 pages).

As this blog has previously noted, the weight of authority is likely against the Bank on the first issue. However, the DC Circuit's decision not to rule in favor of the CFPB may mean there is the chance the whole CFPB is unconstitutional. As for the second argument, this blog also covered a different case where the United States Supreme Court decided a related issue against the government. In the case of Noel Canning v. NLRB, the Supreme Court ruled that President Obama exceeded his constitutional authority when he made appointments to the NLRB without having them first approved by the Senate. Noel Canning is significant because it means that President Obama also unconstitutionally appointed Richard Cordray because Richard Cordray was appointed at the same time as the NLRB appointments. This means that Richard Cordray was not legally the director of the CFPB until he was confirmed by the Senate on July 16, 2013. President Obama appointed Mr. Cordray on January 4, 2012. The reason this matters is that according to the Bank, any rule the CFPB promulgated from January 4, 2012, to July 16, 2013, is invalid because the CFPB did not have the legal authority to issue rules without a director. After Mr. Cordray's confirmation by the Senate the CFPB issued a one page ruling claiming to adopt any rules that the CFPB issued from January 4, 2012, through July 16, 2013. Once the parties finish their briefs we will have a better understanding of the strength of the arguments. However, what should be clear is that there are still significant questions about the constitutionality of the CFPB and the rules it has issued.

Part Two of this blog series, The Reasons the CFPB May Be Unconstitutional, will be published on Thursday, November 19th, 2015.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- John Lande

Categories: John Lande, Banking Law


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