WASHINGTON, D.C. — Could a decision late last week by the U.S.
Circuit Court of Appeals for the D.C. Circuit eventually nullify the moves by the
Consumer Financial Protection Bureau since Richard Cordray became director?

A former top legal counsel at the agency thinks that very
well could be the case.

The developments arose because the appeal court found that
President Barack Obama's recess appointments to the National Labor Relations Board
(NLRB) last January are invalid.

Regulatory lawyers said in a report from Bloomberg that this
ruling could trigger the possibility that regulations and enforcement actions
of the new agency could be overturned — although a court would still have to rule
whether or not Cordray's appointment is unconstitutional.

"This is very bad news for the bureau; there is no way to
slice it any other way," Deepak Gupta, a former top lawyer at the CFPB told
Bloomberg. "There is little question that this applies to the Cordray
appointment."

The Republican leader in the U.S. Senate, Sen. Mitch
McConnell agreed.

"This decision now casts serious doubt  on whether the President's recess appointment
of Richard Cordray to the Consumer Financial Protection Bureau, which the
President announced at the same time, is constitutional," McConnell said.

Before the appeals court made its decision, Obama
re-nominated Cordray to remain at his CFPB post. SubPrime Auto Finance News
published the details here.

In the Bloomberg report, Raymond Natter, a partner with
Barnett Sivon & Natter, said a company can now go to court and seek a
"summary judgment motion" overturning the Cordray appointment and his actions
on the basis of the decision in the labor case.

"It means rules would have to be reissued," Natter told
Bloomberg. "Proposals would have to be re-proposed. Enforcement actions could
be reversed."

The report mentioned that one possible candidate for that
role is State National Bank of Big Spring, Texas, which along with the 60 Plus
Association and the Competitive Enterprise Institute filed a lawsuit in federal
court in Washington last June.

Among the complaints articulated in the suit, the plaintiffs
contend the Dodd-Frank Wall Street Reform and Consumer Protection Act
authorizes the CFPB to prescribe rules identifying unfair, deceptive or abusive
acts or practices under federal law in connection with any transaction with a
consumer for a consumer financial product or service such as a vehicle loan
contract.

"But the act provides no definition for ‘unfair' or ‘deceptive'
acts or practices, leaving those terms to the CFPB to interpret and enforce,
either through ad hoc litigation or through regulation. Nor is the CFPB bound
by prior agencies' interpretation of similar statutory terms," the
plaintiffs said.

"Nor does the Act provide meaningful limits on what the CFPB
can deem an ‘abusive' act or practice," they continued. "(The act) leaves that
term to be defined by the CFPB, subject only to the requirement that the CFPB
not define an act or practice to be ‘abusive' unless it materially interferes
with the ability of a consumer to understand a term or condition of a consumer
financial product or service; or takes unreasonable advantage of a lack of
understanding on the part of the consumer of the material risks, costs, or
conditions of the product or service.

"Those nominal limits offer no transparency or certainty for
lenders, because the limits consist exclusively of subjective factors that can
only be ascertained on a case-by-case, borrower-by-borrower, and can be
interpreted broadly by the CFPB because the agency is subject to no effective
checks or balances by the other branches," they went on to say.

With the recent appeals court ruling now in play, Gupta told
Bloomberg, "This really throws a wrench into pending enforcement proceedings."

Despite the latest developments, the Obama administration
remains steadfast in its support of Cordray and the CFPB.

"It has no bearing on Richard Cordray," White House press
secretary Jay Carney said in reference to the appeals court case. "I'm not
going to predict what happens in the future, but in terms of this case, it does
not bear on Mr. Cordray.

"There are a lot of cases out there in different courts
regarding recess appointments," Carney went on to say. "I would simply say,
again, we respectfully but strongly disagree with this decision. It counters
150 years of precedent. There are over 280 recess appointments made during
intrasession recess appointments by Democratic and Republican administrations
alike."


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