Did the D.C. Circuit Gut the CFPB?

David Evans, Feb 05, 2013

Did the Director of the Consumer Financial Protection Board (CFPB) receive an appointment that violated the U.S. Constitution? A recent D.C. Circuit Court of Appeals decision strongly suggests that the answer is yes. The answer is important because the new powers that the Dodd-Frank Act gave to the CFPB hinged on it having a director.

This is what happened: On January 25, 2013 the D.C. Circuit Court of Appeals ruled on several appointments to an unrelated agency—the National Labor Relations Board—that President Obama had made. President Obama, like a number of his predecessors, had used an exception to the rule that the Senate has to approve presidential appointments. If the Senate is in recess the President can appoint someone temporarily. It turns out that President Obama appointed Richard Cordray to be the CFPB Director in the same period and in the more or less the same way he appointed the NLRB commissioners who are at issue in this case.

The case the D.C. Circuit heard arose from an appeal by a company was subject to an NLRB decision. The company claimed it wasn’t the NLRB decision wasn’t valid because the Board the appointment of several of the commissioners was unconstitutional and without them the Board didn’t have the quorum needed for a decision.

The D.C. Circuit agreed. It found that the Senate wasn’t in fact on recess, at least as defined buy the Constitution, and that therefore the President didn’t have the right to