Compliance Blog

Written by Steve Van Beek

There has been quite a bit of news recently about challenges to the constitutionality of President Obama's recess appointments - including of CFPB Director Richard Cordray.  The National Federation of Independent Business (NFIB) has challenged the appointment (Businessweek.com) of three appointments to the National Labor Relations Board (NLRB).  This challenge was added to an existing lawsuit challenging a new regulation issued by the NLRB which would require notices to employees of their right to unionize.  This is the same NLRB notice that we've blogged about here and here (and which goes into effect April 30, 2012).

As reported in the NAFCU Today yesterday, 39 Republican Senators have pledged their intent to join the lawsuit challenging the constitutionality of the NLRB appointments.  The Senators have sent a letter demonstrating their intent to challenge both the CFPB and the NLRB appointments (Politico.com).

As of today, there is not a lawsuit challenging Cordray's appointment even though the NLRB lawsuit involves some of the very same legal questions.

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Why do I bring this up?  Sometimes when issues continue to be circulated in the news there is the tendency for rumors to start and spread rapidly.  One of those potential rumors is that a challenge to Cordray's nomination could prevent the CFPB's actions from applying to credit unions.

CFPB's Regulatory Authority.  As we blogged on after Cordray's appointment, the CFPB gained power to enforce the "enumerated consumer laws" on July 21, 2011.  This power was not contingent on the CFPB having a Director.  Thus, even without a Director the CFPB had full authority to propose and finalize regulations implementing the consumer laws that applied to depository institutions - such as Regulation Z and Regulation E.  For example, even without a Director the CFPB's could have finalized the recent regulation on remittances.    

CFPB's New Powers.  The CFPB did obtain new powers when Cordray was appointed Director.  While the CFPB's use of these powers could be challenged - they would still be the law of the land.  For example, the CFPB's ability to declare a certain activity as an "unfair, deceptive or abusive act or practice" (UDAAP) would be done through the CFPB's new powers with a Director.  While the CFPB's use of its UDAAP power could be challenged, credit unions would need to follow the CFPB's requirements even during a challenge.  

Summary.  In short, credit unions will need to comply with the CFPB's mandates even if there are ongoing challenges to the CFPB's authority.