Credit unions should not assume the District of Columbia Circuit Appeals Court’s ruling against President Obama’s National Labor Relations Board appointments means the CFPB and its rules will meet the same fate, NAFCU President/CEO Fred Becker told Credit Union Times.
The Jan. 25 decision that invalidated those appointments, and in turn invalidated decisions made by the board since, set a precedent that could potentially also invalidate Director Richard Cordray’s appointment and CFPB regulations finalized last year.
However, Becker said that while the CFPB gained authority over other financial service providers with Cordray’s appointment, the bureau already had authority over depository institutions. As a result, Becker said, CFPB rules that apply to credit unions probably aren’t subject to being overturned in court.
“There is no chance credit unions can sit back and relax, thinking they won’t have to comply with new CFPB rules from last year,” Becker said. “If I ran a credit union, I would not sit back at all, thinking there was a chance they could go away. Instead, I would prepare for them to be implemented on the dates the CFPB has set.”
NLRB plaintiffs say the ruling was significant because it occurred in the same court that is hearing the Cordray suit.
“(The NLRB ruling) will mean a lot in that court,” said John Berlau, senior fellow for finance and access to capital at the Competitive Enterprise Institute. CEI is a co-plaintiff along with the State National Bank of Big Spring, Texas, which is challenging Cordray’s appointment.
That suit also alleges that CFPB rules and the resulting compliance burden have forced the bank to discontinue products and services like mortgage loans and remittances.
Berlau said should the administration appeal to the Supreme Court as expected, all of the grounds of the NLRB suit may not survive. However, he added that he thinks the Supreme Court will place limits on the President’s ability to declare the Senate in recess.
Becker said should the suit go to the Supreme Court, the highest court would clarify whether the CFPB already had authority over depository institutions before Cordray’s appointment, which would determine whether or not credit unions could put up a legal challenge.
However, Becker said he thinks the matter will be resolved out of court.
“I think it’s ‘let’s make a deal’ time,” Becker said in an interview Monday. Republican lawmakers have been pressing for structural change to the CFPB, such as replacing the singular director with a five-person board, making it easier for the Financial Stability Oversight Council to veto CFPB regulations, and bringing the CFPB under the annual congressional appropriations process.
Indeed, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said Jan. 25 that the ruling is an opportunity for reform at the CFPB.
Berlau said structural reform is a goal of CEI, because the bureau’s “unaccountable structure” contributed to rules that extend beyond the CFPB’s authority and are unconstitutional.
“But, even with reform, we would still want those actions vindicated in court,” he said.