Actions by CFPB Could be Ruled Invalid

Enforcement actions against credit card issuers and new mortgage guidelines instituted by the Consumer Financial Protection Bureau may now be in jeopardy.

Last Friday, a three-judge panel of the U.S. Court of Appeals unanimously agreed with Republican lawmakers that the recess appointments to the National Labor Relations Board were unconstitutional. These were made on the same day--January 4, 2012--as Robert Cordray's recess appointment to lead the CFPB.

Many legal analysts believe that Cordray's appointment, if challenged, could also be struck down, as well as all the rules and enforcements enacted during his tenure.

That would mean approximately $425 million of enforcement actions against deceptive marketing practices by credit card companies would be invalid. The new rules the CFPB created for the mortgage bankers to reduce risk for lenders, as well as new rules debt collectors and payday lenders, would also be invalid. This would undo a year of big accomplishments for the CFPB. The new mortgage rules were supposed to give clarity to mortgage lenders and borrowers.

This will take time to work its way through courts and appeals. There are also other lawsuits. The State National Bank of Big Spring, Texas, has filed a lawsuit that questions the constitutionality of Corday's appointment. February 13 is the next deadline for that case.

In the meantime, these legal actions could cripple the CFPB. No actions can be taken by the CFPB unless it has a permanent chairman in place according to the Dodd-Frank law which created the agency.

Last week, President Obama re-nominated Cordray for a full term but this will likely receive strong opposition from Republicans.

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About Bill Hardekopf

Bill Hardekopf is the CEO of and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 12 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor. Bill can be contacted directly at