CFPB Director Richard Cordray declared invalid by House Financial Services Committee

By Gretchen Wegrich

The battle between President Obama’s recess-appointed Consumer Financial Protection Bureau (CFPB) director Richard Cordray and the House Financial Services Committee was re-ignited yesterday, when committee chairman Jeb Hensarling (R-TX) announced in an open letter that the committee would not accept testimony from Cordray on the CFPB’s semi-annual report until Cordray was “validly appointed as the bureau’s director.”

Under the Dodd-Frank Act, the CFPB is tasked with developing a series of regulations protecting both consumers and lenders. The regulations are designed to discourage predatory lending and improve lending transparency. The Qualified Mortgage Rule is one such regulation.

CFPB director Richard Cordray was one of several people appointed to various boards by President Obama on Jan. 4, 2012 during the Senate recess. The Senate has since refused to confirm any of the appointments, which have all been challenged by various lawsuits. On Jan. 25, the other appointments were invalidated by a federal district court, along with all subsequent work of the boards.

President Obama is not the first president to make recess appointments; such appointments have been made dating all the way back to President George Washington. In recent years, George W. Bush made 171 recess appointments, Bill Clinton 139, George H.W. Bush 77, and Ronald Reagan 240.

Committee Chairman Hensarling argued that Cordray’s position of power gave the CFPB director unconstitutional control over ‘the financial destiny of Americans.’ “No other regulator has more influence over the daily financial lives of Americans,” Hensarling said. “Dodd-Frank gives the CFPB director the power to decide what financial products and services will - and will not - be available to American consumers and how much they will have to pay for them. How is it fair to American consumers that one unelected, unaccountable bureaucrat in Washington has the power to decide what kind of mortgage, car loan or credit card they can or cannot have?”

Cordray’s appointment has not yet been validated or invalidated by a judicial court. The president has already renewed Cordray’s nomination, but Senate Republicans have blocked the vote.

The House Financial Services Committee published the letter on their website declaring that the committee was “ready to accept the testimony of the director of the CFPB on the semi-annual report as soon as an individual validly holds this position. Until then, the committee intends to continue to conduct rigorous oversight of the CFPB’s activities, and will expect the CFPB’s cooperation in those efforts, including making other employees available to testify at committee hearings and responding fully to committee requests for documents and information.”

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.