Although the District of Columbia Circuit Appeals Court invalidated President Barack Obama's recess appointments to theNational Labor Relations Board and potentially overturned theboard's decisions since early 2012, credit unions shouldn't assumethe ruling means the CFPB will meet the same fate, said NAFCUPresident/CEO Fred Becker.

CFPB Director Richard Cordray was appointed the same day as theNLRB leaders during a period in which the Senate was in pro-formasession. The NLRB decision sets a precedent that could potentiallyinvalidate Cordray's appointment and CFPB regulations that werefinalized last year.

However, Becker said that while the CFPB gained authority overother financial service providers with Cordray's appointment, thebureau already had authority over depository institutions. As aresult, Becker said, CFPB rules that apply to credit unionsprobably 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 lastyear,” Becker said. “If I ran a credit union, I would not sit backat all, thinking there was a chance they could go away. Instead, Iwould prepare for them to be implemented on the dates the CFPB hasset.”

Despite the advice from Becker, NLRB plaintiffs who are alsochallenging Cordray's appointment say the Jan. 25 ruling wassignificant because it occurred in the same D.C. court that ishearing the Cordray suit.

The NLRB ruling “will mean a lot in that court,” said JohnBerlau, senior fellow for finance and access to capital at theCompetitive Enterprise Institute. CEI is a co-plaintiff along withthe State National Bank of Big Spring, Texas, which is challengingCordray's appointment. That suit also alleges that CFPB rules andthe resulting compliance burden have forced the bank to discontinueproducts and services like mortgage loans and remittances.

Berlau said because the NLRB suit was brought by a company thatobjected to NLRB rulings, the court's decision could pave the wayfor a legal victory for the $300 million State National Bank andother financial institutions harmed by CFPB regulations.

Courts haven't often ruled on recess appointments, Berlau said,but Obama's unprecedented pro forma appointments “really pushed thelimits” of separation of powers between the executive andlegislative branches of government.

“The precedent that Obama administration could set would be verydangerous,” Berlau said. “If the president can declare the Senateto be in recess while just taking a break, you have to ask, can hedo that after they leave for the night?”

Berlau said if the administration appeals to the Supreme Courtas expected, all of the grounds of the NLRB suit may not survive.However, he added that he thinks the Supreme Court will placelimits on the president's ability to declare the Senate in recess.

Becker said if the suit goes to the Supreme Court, the highestcourt would clarify whether the CFPB already had authority overdepository institutions before Cordray's appointment, which woulddetermine whether or not credit unions could put up a legalchallenge.

However, Becker said he thinks the matter will be resolved outof court.

“I think it's let's make a deal time,” Becker said. Republicanlawmakers 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 toveto CFPB regulations and bringing the CFPB under the annualcongressional appropriations process. 

“From what I can perceive, there may be some sense ofconsideration for making structural changes to the CFPB, which thusfar, the president has been dramatically opposed to,” Becker said.“But now in light of the ruling, this may get worked out.”

Berlau said CFPB structural reform is a goal of CEI, because thebureau's “unaccountable structure” contributed to rules that extendbeyond the CFPB's authority and are unconstitutional.

“But, even with reform, we would still want those actionsvindicated in court,” he said.

NAFCU supports those structural changes, although Beckerstressed that the trade association also supports Cordray in hisposition.

“He's reached out to us and has been cooperative,” Becker said.“Our support of the structural changes is not tied to Cordray'sconfirmation.”

That position is similar to CUNA's. President/CEO Bill Cheneysaid CUNA would support legislation to make additional reforms toCFPB and changes to the bureau's funding. CUNA doesn't takepositions on presidential appointees, but the trade association hasbeen very complimentary of Cordray.

CUNA Senior Vice President of Legislative Affairs Ryan Donovansaid he would be shocked if the Obama administration didn't appealthe case to the Supreme Court. Donovan said recent meetings withmembers of Congress have revolved around encouraging hearings onCFPB rules and reducing compliance burden on credit unions.