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Court Ruling Could Risk Credit Card Cases



Some of the major powers that the National Labor Relations Board now wields, such as enforcing rules and regulating non-banking industries such as payday lenders, mortgage brokers and debt collectors, are drawn from having a director in place. The Consumer Financial Protection Bureau was created as a part of the Dodd-Frank banking reform law.

Some $425 million of enforcement actions against credit card companies could be at risk as a result of last week’s court ruling against the Obama administration.

Last Friday, a U.S. Appeals Court said President Obama’s recess appointments to the National Labor Relations in 2011 were unconstitutional. A recess appointment also gave the Consumer Financial Protection Bureau (CFPB) its director, Richard Cordray.

That’s a big deal, because some of the major powers that the bureau now wields, such as enforcing rules and regulating non-banking industries such as payday lenders, mortgage brokers and debt collectors, are drawn from having a director in place. The CFPB was created as a part of the Dodd-Frank banking reform law.

CNNMoney.com reports such a ruling could undo some of the bureau’s biggest victories. They include three big enforcement actions against Capital One, Discover, and American Express for deceptive marketing and other charges that gave $425 million to consumers and another $66.5 million to the bureau as penalty fees.

It could also freeze consumer bureau investigations and stop major rules the agency is currently working on, said former employees of the bureau. It could also call into question the bureau’s recent new rules for mortgage lenders intended to reduce risky lending, Gardner said.

Banks aren’t happy about the growing possibility for regulatory chaos, several banking lobbyists said.

The bureau’s fate could be decided in the next few weeks, because a small community bank, State National Bank of Big Spring, Texas, has already filed a lawsuit questioning whether Cordray’s appointment was constitutional. The next deadline for that case is Feb. 13.

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