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Thursday, July 14, 2016

Court Decision in Texas case vs CFPB

On Tuesday, July 12, a federal district court in Washington, D.C. ruled in a case that questions the constitutionality of the CFPB’s structure and the authority of the CFPB’s director to act before he was confirmed by the Senate (State Nat’l Bank of Big Spring v. Lew (D.D.C. No. 12-1032)).

There were two issues before the court:

1. Whether the CFPB is constitutional as it is currently structured, which raises a separation of powers issue: The district court deferred a decision on this issue until a federal appellate court in Washington, D.C. decides the same issue in an important case pending before that court (PHH Mortgage v. CFPB).

2. Whether CFPB Director Richard Cordray’s actions taken while he was a recess appointee (before the Senate confirmed him) were valid: The district court held that Director Cordray’s actions while a recess appointee were valid, because after he was confirmed by the Senate, he ratified his earlier actions in a notice filed in the Federal Register.

While the second issue was a loss for the banking industry, the decision on the first issue is yet to be decided, which makes the PHH Mortgage vs. the CFPB case filed last October a important case to continue to monitor.

If you are interested in or have any questions about the above cases, please join the monthly ABIA CFPB Task Force call.