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CFPB Structure & Leadership Questioned by Lender


CFPB Director Richard Cordray

The Consumer Financial Protection Bureau (CFPB) has been the target of much scrutiny in the last year as new regulation unfolded and many questioned the structure and leadership within the government agency.

CFPB Director Richard Cordray has been the target of much of the discussion surrounding the CFPB as the leader and decision-maker for the entity. As the head of the CFPB, Cordray is outside of the President’s oversight and control, which some say makes his appointment “unconstitutional.”

A recent battle against the CFPB unfolded with a small community Texas bank filing a motion for summary judgement that sought to declaration that the formation of the bureau and 2012 recess appointment of Director Richard Cordray was unconstitutional.

Continuing its battle against the CFPB, the State National Bank of Big Spring, along with its co-plaintiffs the Competitive Enterprise Institute and 60 Plus Association Texas, filed a motion for summary judgement Monday seeking “declaration that the Consumer Financial Protection Bureau is unconstitutional and the January 2012 recess appointment of Richard Cordray was unconstitutional."

The motion also noted that “all CFPB regulations promulgated during the time of Cordray’s illegal appointment and that impact plaintiffs are invalid and cannot be enforced against plaintiffs.”

The motion for summary was filed in U.S. District Court for the District of Columbia against U.S. Secretary of the Treasury and former Chairman of the Financial Stability Oversight Council Jacob J. Lew.

The suit originally came about after the bank was unable to continue issuing mortgage loans to lenders and complete wire transfers due to CFPB rules and was shot down by a lower court.

Greg Jacob, a partner with the New York City-based firm O’Melveny & Myers LLP, which represents the plaintiffs, said in a prepared statement that the CFPB’s vast ability to regulate and enforce, without accountability, “cannot be reconciled with our Constitution's requirement that government have checks and balances.”

He went on to say, “ Regulations Richard Cordray published under his signature prior to his July 2013 confirmation–despite his attempt to retroactively ratify them with a notice in the August 2013 Federal Register–are invalid and must be struck down.”

“Congress evidently saw the CFPB’s structural ‘independence’ as a salutary feature that it hoped would make it more energetic and effective,” the motion stated. “But the liberty-protecting value of checks, balances, oversight and accountability cannot be sacrificed at the altar of expediency.”

In a public address in October, CFPB Director Richard Cordray defended his agency's actions against those who say the industry is overregulated.

“When we put those new regulations in place, some were critical of our work,” Cordray said. “For example, the 'Ability to Repay' rule requires lenders to make sure that borrowers actually have the ability to repay their loans before extending them a mortgage. Some enjoyed describing this rule, which was also known as the 'Qualified Mortgage' or QM rule, as the 'Quitting Mortgages' rule. They made scary predictions that our rules would cause mortgage costs to double and would cut the volume in half. They said that no one would make any non-QM loans because the risk of litigation was too great. They lamented that our rules would lead to the demise of community banks and credit unions, which would have to withdraw from the mortgage market altogether. We all recognize that change is hard, but we never believed any of this unsupported hyperbole.”

Click here to view the full motion for summary judgement.

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.

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