When President Barack Obama appointed someone to head up the new federal consumer protection agency, he did so knowing the move would be controversial. But now, some analysts in the banking industry say the decision may lead to lawsuits.
The controversial recess appointment of former Ohio attorney general Richard Cordray to the top executive position at the new federal Consumer Financial Protection Bureau could be targeted for lawsuits from “every quarter,” according to a report from Candi Wolff, Citi’s executive vice president for global government affairs. She noted that suits could be expected from private groups like community and labor boards, individuals and even the U.S. Congress itself.
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The contention from critics of the decision is that Obama made the recess appointment—which is legally allowed by the Constitution—during what was not technically a Congressional recess, the report said. In an effort to block the move, Republican lawmakers had planned to keep Congress from being fully adjourned by holding “pro forma” sessions.
In addition, it’s expected that Obama’s decision to go ahead with the Cordray appointment could end up affecting other potential nominees whom the White House was hoping to push through in the near future, the report said. That includes top officials for the U.S. Department of the Treasury, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, all of which are expected to be put on the back burner for some time. The decision could also create other legislative logjams as well.
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“If things weren’t tense before, the political stakes have been upped,” said Wolff. “Republicans in Congress may now see even less reason to seek compromise between the GOP and President Obama. Add to that a hostile election-year environment and even the most non controversial piece of legislation may not make it in 2012.”
Fortunately for consumers, the CFPB, which has been in operation since July 21, 2011 and was created as part of the Dodd-Frank Act, has begun to function as intended under Cordray. It now has begun looking at lines of credit such as payday and private student loans, in addition to continuing its work to simplify lending agreements and oversee credit card offers and practices.
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