Native American Tribe Challenges CFPB CID Based on Illegality of Cordray Non-Recess Appointment

According to Bloomberg the Chippewa-Cree tribe in Montana has refused to comply with a CID from the CFPB based on the illegality of the non-recess appointment of Richard Cordray as Bureau director:

Under Dodd-Frank, the bulk of the bureau’s authority to supervise banks with assets above $10 billion, a group of about 110 that includesJPMorgan Chase & Co. (JPM) and Lafayette, Louisiana-based Iberiabank Corp., doesn’t require that a director be in place. Without a director, though, the agency couldn’t extend its supervision to non-bank financial firms, including online payday lenders.

The uncertainty has helped slow the bureau’s attempts to scrutinize online lending businesses operated by Native American tribes, according to two people briefed on the probe who spoke on condition of anonymity because the matter isn’t public.

Companies operated by the Chippewa-Cree tribe in Montana, the Tunica-Biloxi tribe of Louisiana and the Otoe-Missouria tribe of Oklahoma last year were sent civil investigative demands, a kind of subpoena for business data, the people said.

Tribal Challenge

“The purpose of this investigation is to determine whether small-dollar online lenders or other unnamed persons have engaged or are engaging in unlawful acts or practices relating to the advertising, marketing, provision, or collection of small-dollar loan products,” according to a copy of one of the documents obtained by Bloomberg News.

The Chippewa-Cree challenged the request in part on grounds Cordray’s appointment was illegal. Cordray hasn’t acted on the petition, which could require him to address the constitutional question, the people said. By contrast, when three other companies filed similar petitions, Cordray published responses within 90 days, records show.

James Hopper of the Otoe-Missouria company, Billi Anne Raining Bird-Morsette of the Chippewa-Cree firm and Marshal Pierite of the Tunica-Biloxi lender didn’t respond to requests for comment. Vahey, the bureau spokeswoman, declined to comment on an ongoing enforcement matter.

One expects that as some CFPB targets begin to challenge CFPB’s authority on the basis of the invalid appointment of the Director that this will embolden others to also say that the emperor has no clothes.  This is important for the important constitutional principles at stake, of course, and the importance of structural constitutional protections for individual liberty.  But it also potentially important in the event that if the circuit court opinions eventually are affirmed by the Supreme Court (as I expect they will) a consistent pattern of objection and resistance by private parties is an important element of the de facto office doctrine (this is a useful summary) that might be used to try to ratify the acts that CFPB has taken.  In this vein, Congressman Hensarling’s consistent public challenges to the validity of the CFPB’s powers without a confirmed director would seem to be relevant to the application of the doctrine as well.

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