When President Obama installed Richard Cordray as director of the Consumer Financial Protection Bureau, industry observers declared that a lawsuit was imminent.
But in the weeks following the controversial recess appointment, would-be plaintiffs have held up their hands one-by-one and said, "Don't look at us." Challenging the president's Constitutional authority — and the power of an agency director whose appointment may not be valid — is more complicated than many first assumed.
A successful lawsuit depends entirely on whether the plaintiff has standing — or the legal right — to bring a case in court, and whether they can prove that they were harmed by some action the bureau took that it wouldn't be able to take without a director.
That means a lawsuit will likely wait until the agency takes an enforcement action against a nonbank lender, lawyers said.
"The only people who are going to have standing in the near future are people who the bureau targets for an enforcement action, either in court or through the administrative process at the CFPB," said Alan Kaplinsky, a partner with Ballard Spahr. "Once that happens, then the target of that enforcement action may very well have standing."
An enforcement action would make it easier for a firm to claim the CFPB has done it material harm, such as imposing a civil money penalty or requiring a bank to change the way it does business.
But no one is sure when the first enforcement action will come.
CFPB officials have made clear that addressing problems in the mortgage market and stopping illegal payday lending practices are top priorities.
Asked about ongoing investigations and potential enforcement actions, Cordray told a crowd at the Brookings Institution earlier this month that the agency had "lots of work in the pipeline," but declined to say when it might take action.
"We are actively moving forward on all fronts and will have more to say as things ripen," he said.
