Politics & MoneyMortgage

NRLB decision brings out CFPB opponents

Opponents of the Consumer Financial Protection Bureau introduced legislation this week that could prevent the CFPB from enforcing or implementing regulations without a constitutionally confirmed director in place.

The bill also would block the CFPB from using Federal Reserve funds to support enforcement actions that require the approval of an official CFPB director.

The move comes on the heels of a controversial appellate court decision that invalidated President Obama’s recess appointments to the National Labor Relations Board.

Early on, legal analysts said the NLRB decision, which was handed down by the U.S. Court of Appeals for the D.C. Circuit, could fire up opponents of the CFPB since a similar case is pending against the consumer agency over the president’s recess appointment of CFPB leader Richard Cordray.

U.S. Sens. John Cornyn, R-Texas; Mike Johanns, R-Neb.; and Lamar Alexander, R-Tenn., quickly rolled out legislation in response to the NLRB decision.

The bill, which is titled the The Restoring the Constitutional Balance of Power Act of 2013, is the lawmakers first attempt to use the D.C. Circuit Court’s NRLB decision to curtail Cordray’s power at the CFPB and to prevent regulations and decisions that he made about mortgage and financial services rules — including the qualified mortgage definitions — from taking effect. 

“The Restoring the Constitutional Balance of Power Act of 2013 prohibits NLRB from undertaking or enforcing any decisions that required the approval of a quorum of board members since the President’s overreach,” said Sen. Cornyn. “The legislation also blocks CFPB’s next transfer of funds from the Federal Reserve to carry out any actions that require the approval of a director.”

But in the legal community, it’s still unknown how far a judicial discrediting of Cordray’s recess appointment would impact the CFPB’s power since the agency is a legislative creation, designed under the umbrella of the Dodd-Frank Act.

Right after the ruling, Alan Kaplinsky, a partner at Ballard Spahr, said “We are still researching what the impact of a ruling would be on these final (mortgage) regulations,” Kaplinsky told HousingWire. “I think some of them may be valid even under an acting director, and some of them may not be valid.”

After signing onto the bill, Sen. Johanns added, “These agencies have been operating under a ruse for more than a year. Any decisions or regulations made by the people who have no right to be there are invalid. This legislation forces them to stop functioning as if they legitimately hold office and recognize the reality that the President overstepped his constitutional authority.”


3d rendering of a row of luxury townhouses along a street

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