Last week, the Senate held its first hearing on the Consumer Financial Protection Bureau (CFPB) following President Obama’s controversial recess appointment of former Ohio Attorney General Richard Cordray to lead the CFPB. The Senate Banking Committee met to review the First Semi-Annual Report of the CFPB, which discussed the CFPB’s near term goals and stated that the CFPB will “intensify” the pace of its efforts to “make consumer financial markets work better” over the next six months. Although Senator Roger Wicker (R-MS) called for a Republican boycott of the hearing, several Republicans, including Ranking Member Richard Shelby (R-AL), attended the hearing to reiterate their legal concerns and questions resulting from the appointment of Mr. Cordray and the CFPB’s attempt to wield powers reserved for a Bureau with a Senate-confirmed Director in place.
Much of the appointment’s controversy has focused on whether a recess appointment meets the requirements necessary for the CFPB to enjoy its full range of powers granted under the Dodd-Frank Act. In a report released last year, the Inspectors General of the Federal Reserve and Treasury Department explained that the Dodd-Frank Act authorizes the Secretary of the Treasury to execute the pre-existing powers transferred to the CFPB (not newly established powers) until a Senate-confirmed Director is in place. However, the CFPB cannot exercise its new authority to prohibit certain “unfair, deceptive, or abusive acts or practices,” and cannot supervise the activities of non-depository institutions (e.g., payday lenders, mortgage lenders, and student loan lenders), until a Director is “confirmed by the Senate.” Because of the Senate-confirmation requirement, there is uncertainty whether a recess appointment of the Director allows the CFPB to exercise the new consumer protection and non-bank regulatory powers authorized by Dodd-Frank.
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