All Actions by CFPB Could be Ruled Invalid

NEW YORK ( -- Enforcement actions against credit card issuers and new mortgage guidelines instituted by the Consumer Financial Protection Bureau are in jeopardy.

A three-judge panel of the U.S. Court of Appeals agreed unanimously with Republican lawmakers Jan. 25 that recess appointments to the National Labor Relations Board were unconstitutional. These were made on the same day -- Jan. 4, 2012 -- as Robert Cordray's recess appointment to lead the CFPB.

Many legal analysts believe Cordray's appointment, if challenged, could also be struck down, as well as all the rules and enforcements enacted during his tenure.

That would mean approximately $425 million in enforcement actions against deceptive marketing practices by credit card companies would be invalid. The rules the CFPB created for the mortgage bankers to reduce risk for lenders, as well as rules for debt collectors and payday lenders, would also be invalid. This would undo a year of big accomplishments for the CFPB, including rules meant to give clarity to mortgage lenders and borrowers.

This will take time to work its way through courts and appeals. There are also other lawsuits. The State National Bank of Big Spring, Texas, has filed a lawsuit that questions the constitutionality of Corday's appointment, with Feb. 13 being the next deadline for that case.

In the meantime, these legal actions could cripple the CFPB. No actions can be taken by the CFPB unless it has a permanent chairman in place, according to the Dodd-Frank law that created the agency.

Last week, President Barack Obama re-nominated Cordray for a full term, but this will likely get strong opposition from Republicans.
Bill Hardekopf is chief executive of, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."