Media Coverage
Source: Compliance Week
Media Coverage
01.29.13
A recent ruling by a federal appeals court could render the recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau unconstitutional. It could also invalidate recent rulings by the National Labor Relations Board as well as many of the CFPB's official actions.
“There's not much question that if it is determined that the director of the CFPB was not properly appointed then certainly all the rulemaking applicable to non-banks will be invalid,” said Michael Halloran, a partner in Pillsbury’s corporate and securities practice in Silicon Valley and Washington, D.C. and former deputy chief of staff at the Securities and Exchange Commission.
If Cordray's appointment is invalidated it could set in motion a series of actions, some of them not so favorable to non-bank financial companies. According to Halloran, the CFPB had a Jan. 21 Congressional deadline to issue a variety of rules on mortgage origination and servicing that go into effect in 2014. If it failed to meet the deadline, the rules would go into effect by themselves.
“When a suit is brought and won against the CFPB, you will have a giant problem, because [lacking the authority of a director] the statute goes into effect,” Halloran argued. “The mortgage industry has got to figure out a way to go back and fix all their mortgages to comply with the statute, because the CFPB varied from the statute in many ways. Everybody was getting ready over the next 12 months to fix their mortgage forms to comply with the new rules; now they are going to have to develop another set of forms to comply with the statute in the absence of the rules.”