By Chris Bruce
Consumer Financial Protection Bureau Director Richard Cordray’s pending departure has some wondering if a major constitutional question about his tenure might simply go away.
The full U.S. Court of Appeals for the District of Columbia Circuit is now weighing a case involving PHH Corp. that tests whether the CFPB’s single-director leadership structure violates the U.S. Constitution ( PHH Corp. v. Cons. Fin. Protection Bureau, D.C. Cir. App. en banc, 15-cv-01177, argued 5/24/17 ).
The CFPB has called the case the most important separation of powers case in a generation, but Cordray’s exit could defuse that issue, attorney Joseph P. Lynyak III told Bloomberg Law. Once Cordray leaves, the CFPB might tell the D.C. Circuit that the constitutional issues — such as restrictions on the president’s ability to remove the CFPB director — are moot, acccording to Lynyak, a partner in the Washington and Los Angeles offices of Dorsey & Whitney.
“If the issue was the ability to fire Director Cordray, and if he has resigned, judicial precedent strongly indicates that lower courts should avoid unnecessary direct constitutional decisions,” Lynyak said. “So he leaves and the structure of the CFPB is left for another day — or Congress fixes it instead of the courts.”
The CFPB didn’t immediately respond to a request for comment on litigation-related questions surrounding Cordray’s announcement. The D.C. Circuit heard argument in the PHH case in May. It’s not clear when the court will issue a ruling, though many have predicted that the case is a strong candidate for a hearing by the U.S. Supreme Court. Even if the constitutional issues in the case were set aside, the dispute still raises important questions about the Real Estate Settlement Procedures Act.
Cordray revealed his decision to leave the CFPB in an email to agency staffers. Despite the major role that Cordray has played in recent years, sudden changes by the CFPB aren’t likely, according to Donald C. Lampe, a partner in the Washington office of Morrison & Foerster who represents financial institutions.
“There’s a tendency to overreact and to assume that just because there’s a change in leadership there’s a change in direction,” Lampe told Bloomberg Law. “Our experience with the agencies over the years is that change is a process and not an event,” Lampe said.
Asked how the announcement and Cordray’s imminent exit might affect CFPB litigation, former CFPB deputy enforcement director Ori Lev said immediate changes aren’t likely, though defendants in some cases may move to delay those proceedings.
Once an acting or permanent director is in place, that person likely will review pending litigation and decide whether the agency should take a different course, Lev said. “It wouldn’t be surprising if the agency backed off some of its more aggressive legal positions,” said Lev, a partner in Washington with Mayer Brown.
However, another former CFPB official predicted that the agency could press ahead with even more vigor, especially in the enforcement space.
“Nomination and confirmation of a new director will take many months,” said Quyen T. Truong, a partner in the Washington offices of Stroock & Stroock & Lavan and a former CFPB assistant director and deputy general counsel. “Until an acting or permanent director is in place and able to take control of the CFPB’s day-to-day operations, the staff will take advantage of every moment to move the existing agenda ahead.”
To contact the reporter on this story: Chris Bruce in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)