Jessica M. Karmasek Apr. 23, 2013, 8:00pm

WASHINGTON (Legal Newsline) -- A House Republican and leader of the Financial Services Committee on Monday sent a letter to Richard Cordray, director of the Consumer Financial Protection Bureau, saying Cordray cannot testify before the panel because he has not been confirmed by the U.S. Senate.

Rep. Jeb Hensarling of Texas, in a single-page letter, informed Cordray, a former Ohio attorney general, that under the Dodd-Frank Wall Street Reform and Consumer Protection Act he must be appointed with the advice and consent of the Senate, which he has not.

The CFPB was created by the Dodd-Frank regulatory overhaul and is tasked with overseeing the federal financial laws that specifically protect consumers -- people who keep their money in banks and credit unions, pay for goods and services with their credit cards, and rely on loans to buy homes or pay for college, among other services.

In January, the U.S. Court of Appeals for the District of Columbia Circuit ruled that President Barack Obama's "intrasession appointment" of three new members to the National Labor Relations Board was an unconstitutional abuse of power.

Cordray was appointed to director of the CFPB the same day as the three NLRB members.

Obama has already renominated Cordray to the position.

A group of 43 Republican senators have said they will oppose the confirmation of any nominee, regardless of party affiliation, to be the bureau's director.

"Because you were appointed on the same day and in the exact same manner as these unconstitutional appointments, it is clear, as a number of legal scholars have concluded, that your appointment was also unconstitutional," Hensarling wrote to Cordray.

"Absent contrary guidance from the United States Supreme Court, you do not meet the statutory requirements of a validly-serving director of the CFPB, and cannot be recognized as such."

Cordray appeared before a Senate committee Tuesday to present a semi-annual report on the bureau's activities.

Hensarling said Cordray would not be asked to deliver the report to the House panel.

The plaintiffs' attorneys in the lawsuit against the Dodd-Frank Act said Tuesday they agreed with Hensarling.

"This is a welcome development," said lead plaintiff attorney C. Boyden Gray. "The House, like the D.C. Circuit, recognizes that Cordray's appointment was patently unconstitutional.

"It is absurd to maintain, as the White House and CFPB do, that the Noel Canning case has no relevance to Cordray, since the D.C. Circuit decision is binding on the CFPB unless reversed by the Supreme Court."

Sam Kazman, general counsel for the Competitive Enterprise Institute, a plaintiff in the lawsuit, agreed.

"When the Canning v. National Labor Relations Board ruling was issued this past January, CFPB spokeswoman Moira Vahey reportedly claimed that 'the ruling had no direct effect on the bureau,'" he said. "We don't know whether the bureau's inexplicable indifference to this ruling stems from an inability to accept bad news or from administrative arrogance.

"Either way, the refusal by Rep. Jeb Hensarling, chairman of the House Financial Services Committee, to accept the bureau's testimony is a welcome reminder that its head-in-the-sand attitude is not, as they say, 'sustainable.'"

The lawsuit was originally filed in June by the State National Bank of Big Spring in Texas, the 60 Plus Association and the CEI. Eleven states have since joined the suit.

The plaintiffs allege there are no effective checks and balances in the Dodd-Frank Act, and take issue with the CFPB itself.

From Legal Newsline: Reach Jessica Karmasek by email at

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