Just days after the Consumer Financial Protection Bureau released the last of certain long-awaited regulations, a Federal Appeals Court in Washington, D.C., issued a ruling that indicates Richard Cordray may not have been properly appointed to head the CFPB.
So what does this mean for you? For instance: Do lenders follow regulations the CFPB issued even when they are less restrictive than preceding regulations passed by the Federal Reserve Board? Are lenders that do not follow more stringent regulations issued by the CFPB at risk for government enforcement actions? What do lenders do about the prospect of private litigants initiating claims under what might be either valid or invalid regulations, or pursuing claims under the laws those questionable regulations supersede?
While the answer is far from certain, it appears that the best strategy for the time being is to follow the regulations passed by the CFPB, regardless of the immediate confusion. Putting the Cordray issue aside, the CFPB had authority under Dodd-Frank—with or without a director—to pass most of the important regulations. Thus, the improper appointment of Cordray is less likely to render regulations invalid.
Moreover, even if Cordray is ultimately removed, the Treasury Secretary would most likely resume control, and—in turn—would have the power to re-issue these very same regulations. In addition, although non-depository lenders would not be subject to CFPB enforcement actions, those could be carried out by state and other regulators.
There is one catch. In the event Republican lawmakers are able to successfully negotiate a change to the structure of the CFPB, by blocking the confirmation of any director, a revised leadership structure would likely involve legislation to start rulemaking anew. Hence, should Cordray’s appointment be determined to be improper, a series of events— including Supreme Court decisions and political negotiations—could, ultimately, lead to change. In the meantime, however, the safest bet is to presume the regulations are (or will remain) in place and unchanged.