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CFPB-issued rules under spotlight following ruling on Cordray’s appointment

Richard Cordray

Richard Cordray

A court’s recent ruling of Richard Cordray’s appointment to the CFPB as unconstitutional has some industry experts concerned that the agency’s rules will also be overturned.

Section 4102 of the Dodd-Frank Act states that the director of the CFPB “shall be appointed by the president, by and with the advice of the Senate, from among individuals who are citizens of the United States,” American Banker reports.

In the face of Republican opposition, President Obama used his power of recess appointments to nominate Cordray as the CFPB director. A U.S. circuit court of appeals ruled, however, that while the Recess Appointments Clause of the Constitution allows the president to fill vacancies during a Senate recess, the president can only make recess appointments during the formal Senate intersession — not intrasession—recesses.

The court’s decision has left some Dodd-Frank proponents with concerns that agency opponents will challenge rules issued by the CFPB since its operational beginning. Some industry participants, however, expressed support for the court’s decision but added that the courts should also consider overturning CFPB rules.

“If Cordray’s appointment is in violation of Dodd-Frank, as it appears to be, the courts should do the right thing by nullifying his appointment, and mandating that the selection, and appointment, of the CFPB director go through the Senate’s advise and consent process, as Dodd-Frank stipulates,” Barry Zadworny, the senior vice president of New Jersey-based Roma Bank, said, according to American Banker. “At the same time, the courts need to weight whether regulations issued by a director who was improperly seated should remain in effect.”

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