Earlier today President Barack Obama recess-appointed Richard Cordray as the first director of the newly-formed Consumer Financial Protection Bureau (CFPB), authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The president nominated Cordray in July 2011 for the position, but the Senate has not confirmed him. Today the president asserted the right to make a recess appointment, although there are likely to be challenges to the president’s interpretation of what constitutes a “recess” for purposes of exercising his appointment authority.
The appointment has significant substantive implications for financial services entities that are subject to enforcement and regulation by the CFPB. Without a director, concerns were raised as to whether the CFPB had the authority to promulgate rules and whether it could bring enforcement actions against non-bank financial institutions. Because of the legal uncertainty, the administration had neither authorized the promulgation of rules nor enforcement against non-bank financial institutions.
We anticipate that the CFPB will now move rapidly to promulgate rules and will also start enforcement actions as the agency has used the time since its inception in July 2011, to do the ground work underlying formal process.
Cordray is the former attorney general and treasurer of Ohio, clerked on the Supreme Court for Justice Kennedy and was the editor-in-chief of the University of Chicago Law Review.
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This article was originally published by Bingham McCutchen LLP.