Resources

Consumer Financial Protection Bureau Alert—Vol. 2, No. 11

By the Authors of PLI’s Consumer Financial Services Answer Book 2012-2013 and Edited by Arthur B. Axelson

June 29, 2012

Regulations and Guidance Update

On QM Rule, Industry Encourages CFPB to Delay Mortgage Disclosure Form, Consult Small Business Panel

Since the Bureau of Consumer Financial Protection (CFPB) has delayed finalizing the qualified mortgage (QM) rule until the end of the year, the mortgage industry is advocating that the CFPB delay its plans to release a single mortgage disclosure form until after the QM rule is finalized. The Dodd-Frank Act calls for the CFPB to release the new mortgage disclosure form, which would combine and streamline disclosures required by the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) by July 2012. In contrast, the Dodd-Frank Act does not require the CFPB to define qualified mortgages, part of the larger ability-to-repay rule, until January 2013. 

CFPB Deputy Director Raj Date announced the CFPB’s intention to release the single mortgage disclosure form by the July 21, 2012 deadline in a recent statement to the House Financial Services Subcommittee on June 20, 2012. Date also announced that the CFPB will issue a proposed rule that would provide detailed requirements and guidelines for filling out the forms. At the same hearing, mortgage industry advocates expressed concern that releasing the single mortgage disclosure form without the QM rule would result in confusion or suppress demand for housing. Bill Cosgrove of Union National Mortgage Company, in a written statement on behalf of the Mortgage Bankers Association, stated that “No matter how well intentioned these rules may be, they cannot be allowed to harm American families, the mortgage market or the nation’s still fragile economic recovery.” Industry advocates called on Congress to give the CFPB more time to finalize the single mortgage disclosure form so that the forms could incorporate the QM rule among other significant Dodd-Frank requirements. Writing on behalf of the American Bankers Association, Brenda Hughes of First Federal Savings Bank in Twin Falls, Idaho, emphasized, “This is a massive and important undertaking. The goal must be to achieve a workable and lasting framework of clear and comprehensible mortgage disclosures, and rigid time frames should not trump quality.” Industry groups testifying in favor of a delay in the issuance of the rule included the National Association of Realtors, the American Land Title Association and the Consumer Mortgage Coalition.

Industry groups are also calling on the CFPB to convene a small business panel to address the potential affects of the QM rule on small businesses. Under the Small Business Regulatory Enforcement Fairness Act (SBREFA), the CFPB is one of the three agencies required to solicit feedback from small businesses on rules that may affect them. Because the QM rule was initially proposed by the Federal Reserve Board, however, the rule is exempted from the general requirement. Nevertheless, mortgage industry advocates have indicated that the CFPB should honor the spirit of the SBREFA and consult with small businesses, as the QM rule could have a significant impact on them. 

Regulators Issue Interagency Guidance to Curb Abusive Mortgage Servicing for Military Homeowners

The mortgage service industry regulators recently issued an interagency guidance in their efforts to protect military families from mortgage servicer abuses. The agencies, including the CFPB, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and the Office of the Comptroller of the Currency, recognized the unique situation servicemembers find themselves in after receiving Permanent Change of Station (PCS) orders, which can require members of the military to relocate on short notice. Up to one-third of all military personnel are required to relocate each year. According to Bureau Director Richard Cordray, such orders “can complicate a servicemember’s homeownership decisions in ways that civilians may not experience.”

The interagency guidance, which was issued on June 21, 2012, addresses multiple concerns, including the failure to provide servicemembers with clear and accurate information about their options after receiving Permanent Change of Station (PCS) orders, requesting such servicemembers to waive the rights afforded them by the Servicemembers Civil Relief Act, suggesting that servicemembers miss monthly payments on their loans in order to become eligible for assistance, and failing to provide reasonable means for a servicemember to obtain information on the status of their assistance request or to timely communicate the servicer’s decision regarding such requests for assistance. “This guidance provides specific notice to mortgage servicers that this country already has substantial laws in place to help military members in this still-recovering housing market,” stated Cordray.

Fannie Mae and Freddie Mac have also changed their policies to assist servicemembers receiving PCS orders. Military members receiving transfer orders will now be immediately eligible to seek a short sale of their homes even if they are current on their mortgages. They will also be exempt from Fannie Mae and Freddie Mac deficiency judgments after receiving permission for a short sale. “These changes will make it easier for members of the armed forced with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to honor their financial commitments when they are issued a Permanent Change of Station order,” according to Edward DiMarco, Director of the Federal Housing Finance Agency. Overall, the agencies “want to make sure that mortgage servicers comply with the laws that prohibit unfair or abusive practices” after members of the military receive relocation orders.

The Department of Defense is also taking steps to strengthen rules designed to prevent abusive lending to members of the military. In addition, Congress is considering amendments to the Military Lending Act that would require the Defense Department to regulate installment loans to servicemembers and that would amend the definition of payday loan to include additional high-interest products.

News from the Bureau

CFPB Releases Report to Congress on Reverse Mortgages and Seeks Additional Information Regarding These Products

Pursuant to the Dodd-Frank Act, the CFPB was required to conduct a study on reverse mortgages, which are mortgage loans that allow senior homeowners to tap the equity in their home without incurring monthly payments. The study culminated in a Report to Congress which the CFPB released on June 28, 2012 and can be found at http://www.consumerfinance.gov/reports/reverse-mortgages-report/.   

In designing the study, the CFPB’s objectives were to (1) provide an authoritative resource on reverse mortgage products, consumers, and markets; (2) identify and assess consumer protection concerns; and (3) explore critical unanswered questions and update the public body of knowledge to reflect new market realities. The Report, which presents the results of the study, noted the following key findings: (1) reverse mortgages are complex products and difficult for consumers to understand; (2) reverse mortgage borrowers are using the loans in different ways than in the past, which increase risks to consumers; (3) product features, market dynamics, and industry practices also create risks for consumers; (4) counseling, while designed to help consumers understand the risks associated with reverse mortgages, needs improvement in order to be able to meet these challenges; and (5) some risks to consumers appear to have been adequately addressed by regulation, but remain a matter for supervision and enforcement, while other risks still require regulatory attention.

The Bureau also issued a Notice and Request for Information to gather public input on follow-up questions about reverse mortgages. The CFPB is seeking feedback on the factors most important to consumers when they are considering a reverse mortgage, the way consumers use reverse mortgage proceeds, the longer-term outcomes of reverse mortgage borrowers and certain practices that may differ depending on the type of business that is offering the reverse mortgage. On June 26, the Notice was sent to the Federal Register for publication and written comments must be submitted on or before 60 days after it is published in the Federal Register.  

The Bureau’s study is significant since the Dodd-Frank Act authorizes the CFPB to issue regulations it determines, as a result of the reverse mortgage study, are necessary or appropriate to accomplish the purposes of the Act. These regulations may include providing integrated disclosures and identifying practices as unfair, deceptive, or abusive. The CFPB also has authority to supervise nonbank reverse mortgage companies and larger depository institutions and credit unions for compliance with federal consumer financial protection laws.

The CFPB has indicated that the findings of the study reveal several areas where it can play a role to protect consumers from risks posed by reverse mortgages and to help consumers make better decisions about reverse mortgages. For example, the CFPB may: (1) issue regulations under the federal consumer protection laws addressed specifically to protecting consumers considering a reverse mortgage; (2) develop improved approaches to engage consumers considering a reverse mortgage and empower them to make better informed decisions; (3) monitor the market for unfair, deceptive, or abusive practices and compliance with existing laws; (4) accept complaints from consumers and work to resolve those complaints; and (5) work with the Department of Housing and Urban Development (HUD), the parent agency of the FHA, to develop solutions to issues identified in this report over which HUD has influence.

Consumer Financial Protection Bureau Publishes Credit Card Complaint Database and Seeks Comment on Disclosure of Complaints Regarding Other Financial Products

The CFPB began publishing credit card complaints in a searchable database on June 19, 2012, allowing the public to see the way individual banks handle complaints. The goal of the searchable database is to provide more information to consumers, businesses, and advocacy groups about an important financial product, according to Richard Cordray, director of the CFPB. The database includes the type of complaint, the complainant’s ZIP code, the name of the company, and a description of what action, if any, the company took in response—no personal information about the customer is included.

The Consumer Complaint Database is currently limited to credit card complaints received since June 1 for banks with more than $10 billion in assets. The goal is to expand the database by the end of the year to include more of the thousands of credit card complaints for large banks that the Bureau has received since it opened in July 2011, Cordray said. Banks and other financial institutions have already responded to 33,000 complaints, approximately 89 percent of the complaints sent to them by the Bureau.

Based on the 137 credit card complaints the Bureau has received since June 1, Capital One is at the top of the list, with 33 complaints. Citigroup was second with 27 complaints, followed by JPMorgan Chase with 24 and Bank of America with 15. Overall, Bank of America accounted for about 13 percent of the 13,210 complaints, mostly regarding credit cards, submitted to the Bureau between July 21 and December 31, 2011. J.P. Morgan and Citigroup each accounted for approximately 11 percent. Capital One received eight percent of the complaints and Wells Fargo five percent These percentages were fairly consistent with the size of each bank’s credit card business.

The CFPB views the publication of the database as a major milestone for consumers. “Each and every time we hear from American consumers about their troublesome transactions with financial products, it gives us important insight. The information helps us, and it should be available to help others, too,” Cordray said. “By making our data publicly available, initially in the area of credit cards, we hope to improve the transparency and efficiency of this essential consumer market.”

But many industry groups oppose making the database information public, arguing that the complaints are subjective, unverified, anecdotal, incomplete and unreliable. “Disclosure of these complaints in a public database is going to be seen as government imprimatur of unverified complaints, the accuracy of which nobody can stand up and stand behind,” said Richard Riese, senior vice president at the Center for Regulatory Compliance for the American Bankers Association. Riese also said it was unfair that the database will not cover smaller banks since the CFPB directly supervises only large banks for compliance with consumer protection laws. Others stress that there is no public policy purposes served by the release of the data and that reputations will be harmed based on unreliable data. Nessa Feddis, Vice President and Regulatory Counsel for the American Bankers Association, maintains that “Bureau publication of complaint data alone implies an official endorsement of inferences drawn out of context and suggests reliability about overall issuer customer experience and satisfaction that is not well-founded and that invites untrustworthy analysis that will mislead consumers.”

On the other hand, Ed Mierzwinski, Consumer Program Director for the U.S. Public Interest Research Group, said the database will help customers level the playing field with powerful companies. “Nobody wants to be the first on this list, so that means companies will improve their complaint handling, improve their responsiveness,” he commented.

The CFPB plans to extend the database to other financial products so that it includes mortgages, private student loans, and auto loans. On June 15, the Bureau published a notice seeking comments on adding complaints for other services under its jurisdiction to the database. Written comments must be submitted by July 19, 2012.

On December 8, 2011, the Bureau published in the Federal Register a proposed policy statement describing its plans to disclose data about the credit card complaints that consumers submit to the Bureau. After receiving and considering a number of comments, the Bureau has now finalized its plans for credit card complaint disclosure. To provide guidance to the public, including industry participants, those credit card-specific plans were published in final form (the Policy Statement) at the same time as the new notice and request for comment.

As described in the Policy Statement, the Bureau will disclose data about credit card complaints in two ways. First, the Bureau will issue its own periodic reports about credit card complaint data.  Second, the Bureau will provide public access to an electronic database (the public database) containing certain fields for each unique credit card complaint. Together these disclosures are intended to help provide consumers and others with “timely and understandable information to make responsible decisions about financial transactions” and to enhance the credit card market’s ability to “operate transparently and efficiently. It is this two-part system that the present Concurrent Notice proposes to duplicate for other consumer complaints.

The Bureau believes that the basic structure of the credit card complaint data disclosure policy, including the public database, can appropriately be duplicated for other consumer products and services in addition to credit cards. As a result, the Bureau is proposing that the two-part complaint data disclosure system described in the Policy Statement be extended to cover complaint data about these other products and services.

Consumer Financial Protection Bureau Launches Investigation Into Elder Financial Abuse

In furtherance of section 1013(g)(1) of the Dodd-Frank Act, which requires the CFPB to facilitate the financial literacy of individuals aged 62 and older, the CFPB has launched an investigation into the financial exploitation of senior citizens. “The silent crime of financially exploiting the elderly is widespread and it is devastating. It is critical for us to act,” said Richard Cordray, Director of the CFPB, at an event marking World Elder Abuse Awareness Day at the White House on June 14, 2012.

As part of this new study into elder abuse, the CFPB published a request for information on June 19, 2012 seeking public input on scams perpetrated against the elderly as well as other related data. Written comments are due on or before August 20, 2012.

While financial scams have long been in existence, scams against senior citizens have increased as the economy has struggled. Two studies over the past three years have drawn attention to this phenomenon. For one, a 2011 study by Metlife Mature Market Institute found that Americans aged 60 and up were cheated out of at least $2.9 billion in 2010, reflecting a 12 percent increase from 2008. Another study by the nonprofit Investor Protection Trust found that one out of every five Americans over the age of 65 had been financially swindled in 2010.

The primary perpetrators of such exploitations are family members, advisors, planners, and other persons in a position of trust. Scammers recognize what research has proven, that as people age the ability to understand and make effective financial decisions declines. “Many seniors have routines, and their predictable patterns make them easier targets for predators,” Cordray said. What is more, the likelihood for senior citizens to fight back is low because they feel responsible and embarrassed.

Thus, in an effort to combat financial exploitation of senior citizens, the CFPB is seeking input from the public to learn more about senior finance issues and abuse including an evaluation of financial adviser certifications and designations and what resources are available for seniors to help them make informed decisions about financial advisers. The Bureau also would like information regarding specific types of fraudulent, abusive and deceptive practices that target older Americans, older veterans and military retirees, as well as the effectiveness of current financial education and counseling available to the elderly. In addition, the Bureau is requesting information about fraud involving military retirement and pension funds. The Bureau will use the information gathered to determine the best way to prevent financial abuse against the elderly and to initiate financial safeguards to protect them.

CFPB Seeks Information and Expands Study on Private Student Loans

The CFPB has launched a deeper investigation into private student loans as part of its mandate to review borrower complaints on student loans and provide recommendations to Congress. On June 14, 2012, the CFPB published an additional request for comment in the Federal Register asking state agencies, colleges, consumer advocates, and lenders to submit information and data regarding recent private student loan complaints. The CFPB also sent a letter to state attorneys general and higher education officials requesting their participation in the request for comment by sharing complaint data and analysis on private student loans. The CFPB emphasized that the additional request for comment does not encompass individual borrower complaints or personally identifiable information regarding borrower complaints. Written comments must be received on or before August 13, 2012.

To help focus the comments, the CFPB provided two questions for responders to answer. 

First, the CFPB has asked for responses regarding what complaints are submitted by borrowers of private student loans. This inquiry includes the following topics: (1) whether the complainant is the primary borrower, co-signer, school, or other party; (2) the topic(s) featured in complaints (e.g., credit reporting, debt collection, billing disputes); (3) the types of institutions of higher education that complainants attend; and, (4) generalized descriptions or summaries of individual private education loan borrower complaints that do not include personally identifiable information.

Second, the CFPB has asked for responses regarding what processes institutions have in place to respond to complaints from private education loan borrowers. This inquiry includes the following topics: (1) how institutions receive complaints from private student loan borrows; and, (2) how institutions respond to complaints from private student loan borrowers.

Overall, the CFPB believes that student loan reform is necessary because (1) students are entitled to be fully informed before taking on student loan debt and (2) the increasing loan debt has a direct effect on the U.S. economy. At a banking conference, Rohit Chopra, the CFPB Student Loan Ombudsman, cautioned that student loan debt could hamper the housing market recovery and have long-lasting effects on other bank products. 

The CFPB, in conjunction with the Department of Education, is also in the process of finalizing a joint study on the private student loan market. In connection with the study, which must be completed by July 21, 2012, the CFPB previously solicited comments from student borrowers.  Last week, the CFPB published online more than 2,000 of these consumer comments. Of the 2,000 comments, the CFPB noted that there are three common issues that emerged: (1) borrowers are relying upon school financial aid offices for information and guidance for which loans to choose, but students are receiving inaccurate and inadequate information; (2) borrowers are struggling to manage their private student loan debt; and, many express significant regret in pursuing a degree; and, (3) borrowers are experiencing difficulty navigating the repayment process including, lost payments, record-keeping issues, onerous debt collection practices, and limited flexibility to negotiate repayment plans. Many of the comments included student experiences with unresolved complaints, an inability to determine who owns or services their loan, inconsistent documents and disclosures, as well as confusing information from colleges about the advantages of federal versus private student loans.

The CFPB has been actively pursuing a number of other initiatives to assist borrowers of student loans, including:

  • Releasing web tools like the Student Debt Repayment Assistant and the beta version of a financial aid comparison tool;
  • Conducting an in-depth study of the private student loan marketplace, revealing that there is over $1 trillion in outstanding student loan debt; and
  • Collaborating with the Department of Education to develop the draft “Know Before You Owe financial aid shopping sheet.”

CFPB Announces Senior Staffing Changes

The CFPB recently announced several changes to senior leadership positions within the Bureau.  These staffing changes include the following:

  • Steven L. Antonakes will now serve as the Associate Director for Supervision, Enforcement and Fair Lending.  He previously served as the CFPB's Assistant Director of Large Bank Supervision after joining Elizabeth Warren’s transition team in November, 2010.
  • Meredith Fuchs will now serve as CFPB General Counsel.  She joined the CFPB in 2011 as Principal Deputy General Counsel before serving as Chief of Staff to CFPB Director Richard Cordray. Garry Reeder is now the Director’s acting Chief of Staff.
  • Len Kennedy will now serve as Senior Advisor and Counselor to Director Richard Cordray. He most recently held the position of General Counsel and CFPB Associate Director.
  • Camille Busette, previously a Senior Fellow at the Center for American Progress focusing on financial opportunities for low income individuals, joined the CFPB as Assistant Director of the Office of Financial Education.
  • Clifford Rosenthal joined the CFPB as Assistant Director of Financial Empowerment. Before joining the Bureau he served for more than 30 years as President and CEO of the National Federation of Community Development Credit Unions, which serves low-income communities.
  • Wendy E. Kamenshine started at the CFPB in July 2011 as the Acting Ombudsman to establish the CFPB Ombudsman's Office and she officially joined the Bureau last month as its Ombudsman.

Miscellany

The Constitutionality of the CFPB and the Dodd-Frank Act Challenged in Federal Court

Critics of the CFPB and the “recess appointment” of Richard Cordray as the Bureau’s Director may finally have their day in court. Late last week, a Texas Bank and two advocacy groups filed a lawsuit in the United States District Court for the District of Columbia challenging “the unconstitutional formation and operation” of the CFPB and the Financial Stability Oversight Council (FSOC). The suit also challenges Cordray’s “recess appointment” as unconstitutional. The suit, however, may be short-circuited by its own deficiencies, including a lack of standing to pursue these claims.

The suit, State National Bank of Big Spring, Texas, et al. v. Geithner, et al., No. 1:12-cv-01032-esh., filed by the State National Bank of Big Spring, Texas, the Competitive Enterprise Institute (a public policy organization), and the 60 Plus Association (a conservative advocacy group for seniors) contends that the powers granted to the CFPB and FSOC are overly broad and not subject to any checks and balances in violation of the separation of powers doctrine.

The plaintiffs allege that Title X of the Dodd-Frank Act grants the CFPB “unlimited rulemaking, enforcement, and supervisory powers over ‘unfair,’ ‘deceptive,’ or ‘abusive’ lending practices,” and “eliminates the Constitution's fundamental checks and balances that would ordinarily limit or channel the agency's use of that power.” Plaintiffs counsel C. Boyden Grey—former White House counsel under George H. Bush—explains that “Dodd-Frank aggregates the power of all three branches of government in one unelected, unsupervised and unaccountable bureaucrat.”  

Similarly, the plaintiffs allege that “Title I of the Dodd-Frank Act establishes FSOC, an interagency ‘council’ with sweeping power and effectively unbridled discretion.” Specifically, the plaintiffs object to the FSOC’s “unprecedented discretion” to identify which nonbank financial companies are “systemically important,” and purportedly gives those companies an “unfair advantage over competitors in attracting scarce, fungible investment capital.” The plaintiffs further object to Title I’s prohibition against judicial review of “whether the FSOC's actions are ‘in accordance with law.’”

Finally, the Plaintiffs challenge Cordray’s “recess appointment” on the grounds that the appointment “is unconstitutional because the Senate was not in ‘recess,’ as required to give effect to the President's power to make recess appointments.” 

In response, CFPB spokeswoman Jennifer Howard dismissed the complaint as “dredg[ing] up old arguments that have already been discredited.” White House spokeswoman Amy Brundage remarked that “[t]The President fought to put into law the strongest consumer protections in history, and he will continue to fight any effort from our opponents to weaken the CFPB or water down its ability to protect middle class families." Deepak Gupta, former senior counsel to the CFPB, called the lawsuit “more a political stunt than a serious legal challenge” to the Dodd-Frank Act. 

Jonathan Turley, a constitutional law expert at George Washington University, believes that the suit has a good chance of overturning Cordray's appointment. Turley, who believes that Cordray's appointment was unconstitutional, explained that "Presidents have gradually expanded their claimed ability to appoint officials during recesses to the point that it's become perfectly absurd.” Turley expressed doubts that a broader challenge to the CFPB and FSOC would be successful.  Turley explained that "[t]he courts tend to leave these questions to the political process to work out. I think [the plaintiffs] have plausible arguments, but the advantage on that question still rests with the administration.”

The Court, however, may never reach these issues because it is not clear that the plaintiffs actually have standing to pursue their claims. Specifically, the plaintiffs’ claims of injury, which are required under the “case or controversy” clause of the Constitution, seem dubious at best. 

State National Bank of Big Spring (Bank) alleges that it has been injured in two ways.  First, the Bank alleges that a rule imposing new disclosure and compliance requirements with respect to international remittance transfers promulgated by the CFPB increased its costs in providing these services and caused the bank to cease providing them altogether. The complaint, however, is devoid of any allegations that the bank actually lost any money when it ceased offering these services.  Moreover, these compliance costs, which are normally passed on to customers, would arguably impact all banks equally. Thus, the Bank’s alleged injury is not direct, but generalized, and, therefore, does not necessarily confer standing on the Bank.

Second, the Bank claims that it ceased its residential mortgage lending business in October 2010 due to the “regulatory uncertainty” caused by the broad authority granted to the Bureau. The Bank’s exit, however, was not mandated by any action of the CFPB and appears to have occurred at least a year before the CFPB began regulating residential mortgages. Additionally, nearly all businesses that are subject to the authority of any regulatory agency operate under a certain level of uncertainty and, therefore, the Bank’s purported injury is, again, generalized and does not necessarily establish standing. Remarkably, the plaintiffs fail to advise the Court that, due to its size, the Bank is not generally subject to scrutiny by the Bureau.

The injuries alleged by the Competitive Enterprise Institute and the 60 Plus Association are even more attenuated. They both claim that regulations promulgated by the CFPB now and in the future threaten certain investment programs, bank accounts,  credit cards, and insurance by increasing their costs and reducing their availability.  As with the Bank, these plaintiffs do not allege that they have actually suffered any injury.  Moreover, the plaintiffs’ alleged injuries are not particularized, but could be assert by any individual or business who is directly or indirectly subject to any regulation from any regulatory agency, and, therefore, does not necessarily confer standing on these plaintiffs.

Additionally, it is not clear that the plaintiffs would have standing to challenge Cordray’s “recess appointment” because none of the plaintiffs can allege any direct or particularized injury caused by an act of the CFPB.  Instead, it appears that the plaintiffs are simply alleging that the Cordray’s appointment was not in accordance with the law. The United States Supreme Court, however, has consistently held “that an asserted right to have the Government act in accordance with law is not sufficient, standing alone, to confer jurisdiction on a federal court.” Allen v. Wright, 468 U.S. 737 (1984).

Regardless of the plaintiffs lack of standing, their complaint is based on several arguments that may not withstand judicial scrutiny.  For example, the plaintiffs assert that the Dodd-Frank Act violates the separation of powers doctrine by taking the “power of the purse” out of Congress’s hands and “authorizes the CFPB to fund itself by unilaterally claiming funds from the [Federal Reserve Board].” This argument fails because it is unlikely that a Court will overturn Congress’s decision to take the “power of the purse” out of its own hands. This argument also fails because several regulators, including the Federal Reserve, the FDIC, and the OCC, are also independently funded and free from the congressional appropriations process.   

The plaintiffs also complain that "Judicial review of the CFPB's actions is limited, because Dodd-Frank requires the courts to give extra deference to the CFPB's legal interpretations." This requirement, however, merely complies with the United States Supreme Court’s ruling in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837 (1984), which held that courts should defer to agency interpretations of statutes, unless they are unreasonable.

The CFPB’s answer is due at the end of the month, and it is expected that it will seek to dismiss the case. 

Judicial Watch Files Freedom Of Information Act Suit Against CFPB Over Cordray Appointment

Judicial Watch, the self-proclaimed  “public interest group that investigates and fights government corruption,” filed suit earlier this month under the Freedom of Information Act, 5 U.S.C. § 552 (FOIA), to obtain records regarding Director Richard Cordray’s “recess appointment.” The suit alleges that the CFPB has failed to respond properly to two requests for access to public records regarding Cordray’s appointment as director of the CFPB. The suit also seeks information regarding President Obama’s visit to the CFPB on January 6, 2012—two days after Cordray’s appointment.

In its complaint, Judicial Watch alleges that it made two requests for information on January 12, 2012 and January 25, 2012. The Complaint contends that the CFPB violated FOIA by failing to respond to the January 12th request and only offering a “interim response” to the January 25th request that included the production 222 pages of documents. In response to the complaint, the CFPB has purportedly made a “final” response to Judicial Watch’s request that includes the production of “a dozen pages of responsive documents.” 

The CFPB’s “final” response, however, does not appear to have satisfied Judicial Watch, as it waited until after CFPB’s supplemental “final” response to publicly announce its lawsuit.  In its press release, Judicial Watch’s President Tom Fitton argues that the “Cordray appointment is an abuse [by the President] that disregards the U.S. Constitution and the U.S. Senate's role in vetting presidential appointments” and that Judicial Watch “intend[s] to hold the Obama administration accountable to the rule of law.” Judicial Watch also contends that it has received documents from the CFPB indicating that “Cordray himself recognized questions about the constitutionality of his own appointment.” The CFPB’s answer to the complaint is due at the end of June.

Regulatory Scorecard

Please click here to access a printable version of the Dykema Regulatory Scorecard, our up-to-date chart of pending and final regulatory activities and proceedings at the CFPB.

Contacts and Caveats

For more information about Dykema’s Financial Services Regulatory and Compliance practice, please contact any of the listed attorneys. 


As part of our service to you, we regularly compile short reports on new and interesting developments in our business services program. Please recognize that these reports do not constitute legal advice and that we do not attempt t cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments on this newsletter, or any Dykema publication, are always welcome. © 2012 Dykema Gossett PLLC.

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2018 Dykema Gossett PLLC.