The U.S. Supreme Court has agreed to review the decision of the U.S. Court of Appeals for the D.C. Circuit in Noel Canning v. NLRB, which held that President Obama's January 2012 recess appointments to the National Labor Relations Board were invalid. Although Richard Cordray's appointment as Director of the Consumer Financial Protection Bureau is not at issue in the case, the Supreme Court's ultimate ruling will effectively determine that appointment's validity because it was made on the same day and through the same assertion of recess appointment authority as the NLRB appointments.

The NLRB recess appointments were made on January 4, the day after a new session of Congress had begun and while the Senate was conducting a series of "pro forma" sessions. The D.C. Circuit held that the appointments violated the U.S. Constitution's Recess Appointments Clause (RAC) because the RAC only allows a president to make such appointments during an intersession recess of the Senate, and they can only be used to fill vacancies that first arose during the recess in which the appointments were made.

In its petition for certiorari, the NLRB only asked the Supreme Court to review the two grounds on which the D.C. Circuit based its decision. While respondent Noel Canning did not oppose the petition, however, it asked the Court to consider a third question not addressed by the D.C. Circuit: whether the President's recess appointment authority can be exercised when the Senate is convening every three days in pro forma sessions. In its order granting certiorari, the Court agreed to hear this third question.

Should the Court invalidate the NLRB appointments, the potential impact on the CFPB would be monumental. This would call into question the validity of past CFPB actions, particularly any action involving the CFPB's exercise of authority that was newly created by the Dodd-Frank Act, and the CFPB's ability to act in the future. Most notably, the CFPB's newly created authority includes its supervisory and enforcement authority over non-bank entities such as payday lenders; private student lenders; debt collectors and debt buyers; and mortgage brokers, lenders, and servicers.

The Court's decision can be expected by the end of this year or early next year.

Ballard Spahr's Consumer Financial Services Group produces CFPB Monitor, a blog that focuses exclusively on important CFPB developments. To subscribe, use the link provided to the right. The group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, Practice Leader Jeremy T. Rosenblum at 215.864.8505 or rosenblum@ballardspahr.com, Christopher J. Willis at 678.420.9436 or willisc@ballardspahr.com, or Keith R. Fisher in the Bank Regulation and Supervision Group at 202.661.2284 or fisherk@ballardspahr.com.

 


 

Copyright © 2013 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Related Practices

Consumer Financial Services
Mortgage Banking
Labor and Employment

CFPB 

Subscribe to the blog via e-mail >