Senate Republicans, following the United States Court of Appeals for the District of Columbia Circuit’s decision in Canning v. Nat'l Labor Relations Bd., No. 12-1115, have launched a multi-tiered effort aimed at revamping the CFPB. Believing that, under the logic of Canning, the “recess” appointment of Richard Cordray as Director of the CFPB is likewise void, Senate Republicans have seized on this opportunity to make certain demands of President Obama and to introduce legislation aimed at restructuring the CFPB.
On Thursday, January 31, 2013, Sen. Jerry Moran (R-Kan.) introduced The Responsible Consumer Financial Protection Regulations Act of 2013 that would replace the CFPB Director with a five-member commission, similar to the governance structure of the Federal Trade Commission and Securities and Exchange Commission. The Act would also subject the CFPB’s funding to the Senate appropriations process.
Then, on February 1, 2013, 43 (out of 45) Republican Senators sent President Obama a letter vowing to block a confirmation vote on a Director of the CFPB “until the structure of the Consumer Financial Protection Bureau is reformed.” The “reform” these Senators are seeking is nearly identical to the reforms in Sen. Moran’s legislation. Specifically, these Senators seek: (i) the establishment of a board of directors to oversee the CFPB and a safety-and-soundness check for the prudential regulators; and (ii) to subject the CFPB to the Senate appropriations process. These Senators argue that these changes are necessary because, “[a]s presently organized, the CFPB is insulated from congressional oversight of its actions and budget. Far too much power is vested in the sole CFPB director without any meaningful checks and balances.”
Senators Johanns (R-NE), Alexander (R-TN), and Cornyn (R-TX) have also introduced legislation—The Restoring the Constitutional Balance of Power Act of 2013—following Canning that would prohibit the NLRB and CFPB from enforcing or implementing decisions and regulations without a constitutionally confirmed board or director. The legislation also blocks the CFPB's next transfer of funds from the Federal Reserve that would be used to carry out any actions requiring the approval of a director.
While the ultimate impact of the Canning decision on the CFPB is uncertain—and will not likely be clear until the United States Supreme Court weighs in, the Canning decision re-energized Senate Republicans in their efforts to “re-shape” the CFPB. The hope of these elected representatives is that the decision ultimately could push President Obama to make political concessions to address uncertainties caused by his recess appointment of Mr. Cordray in January 2012.