On Friday, January 25, the D.C. Circuit issued its much anticipated opinion in Canning v. NLRB, holding that President Obama's "recess" appointments to the NLRB were invalid because there was no actual recess under the Recess Appointments Clause of the Constitution. See our earlier post on the decision.
The Canning opinion could have a profound impact on the CFPB because President Obama appointed CFPB Director Richard Cordray on the same day that he appointed the NLRB members discussed in Canning.
Perhaps seeing the writing on the wall, President Obama re-nominated Mr. Cordray one day before the D.C. Circuit decided Canning. However, if the Senate does not confirm Mr. Cordray (a likely outcome due to Republican opposition), the CFPB may once again be without a director.
As we noted back in 2011, there are questions about which powers the CFPB can legitimately wield without a director. Based on a Treasury Department report issued in January, 2011, a director-less CFPB can exercise any powers that it inherited from regulatory agencies whose functions it overtook back in July of 2011. Under the Treasury Department's interpretation of the CFPB's powers, some significant CFPB actions such as its recent issuance of final rules amending Regulations X and Z would stand. However, the Treasury Department report is far from a definitive interpretation of a director-less CFBP's powers, and an invalidation of Mr. Cordray's appointment could have far reaching effects on all of the CFPB's past actions and future plans.
The NLRB will almost certainly appeal the Canning decision, and the Third and Fourth Circuits are set to decide the same question presented in Canning in NLRB v. New Vista Nursing, No. 11-3440 (3d Cir.) and Nestle Dreyer's Ice Cream Company v. NLRB, Nos. 12-1684 and 12-1783 (4th Cir.), which could either create a Circuit split or give the reasoning from Canning additional support. However, even standing alone the Canning decision could have a dramatic and immediate impact on the CFPB. Financial services companies should keep an eye out for the CFPB's response to the ruling in Canning as the question of whether Mr. Cordray's appointment was legal makes its way up to the Supreme Court.
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