Lenders will have to wait for the courts to resolve the validity of Richard Cordray’s recess appointment to be the first Consumer Financial Protection Bureau director, according to a congressional expert, who says the politicians have little incentive to act quickly.
Both Republicans and Democrats “love this fight” because it charges up their base supporters, according to Isaac Boltansky, a policy analyst at Compass Point Research & Trading.
“Republicans can focus on the fact that the president has been struck down in his attempt to circumvent the Senate,” Boltansky said Monday at a webinar sponsored by the Ballard Spahr law firm.
“Democrats and the White House can say that Republicans are standing in the way of a consumer financial watchdog,” he added.
Republican senators have made it clear that they intend to block Cordray’s confirmation by the Senate until the White House agrees to restructure the CFPB into a five-member commission and gives Congress control over the bureau’s budget. The CFPB is currently run by the single director and the bureau is independently funded by the Federal Reserve Board.
“Senate Democrats and the White House have no intention of acting in the near term,” the political analyst said. “The next move is really in the courts.”
But the courts rarely act quickly.
The U.S. District of Columbia Circuit Court’s ruling in Canning v. National Labor Relations Board did not specifically address the recess appointment that made Cordray the first CFPB director.
But it casts doubt on the legality of Cordray’s appointment and validity of the rules he has approved, including the QM, loan officer compensation and servicing rules.
Nevertheless, it appears lenders and servicers will have to act prudently and move ahead on implementing those rules that go into effect in January 2014, according to Richard Andreano, a partner at Ballard Spahr.
“As an industry, we really don’t have much of a choice,” he said.
Andreano noted, however, that industry groups may ask the CFPB for more time to implement the servicing requirements.