House panel refuses to hear testimony from chief of consumer financial bureau

The chairman of the House Financial Services Committee is refusing to hear testimony from a top financial regulator, arguing his current appointment to the position is legally invalid.

Chairman Jeb Hensarling (R-Texas) announced Monday that his panel will not accept testimony from Richard Cordray, the current director of the Consumer Financial Protection Bureau (CFPB). In a pair of letters sent to the regulator, he contends Cordray reached the position via unconstitutional means and is not the legitimate director of the agency.

“There is no legally-appointed director of the CFPB at this time,” he said. “By law, the committee can receive this testimony only from a director who is appointed in accordance with the Constitution and the Dodd-Frank Act, which created the bureau.”

{mosads}President Obama installed Cordray as CFPB director at the beginning of 2012, after Senate Republicans blocked the nomination. The White House claims Cordray was put in place via a recess appointment, but Republicans have cried foul, arguing that Congress was kept in brief “pro forma” sessions during longer breaks specifically to prevent a recess that would allow such appointments.

But in January, a federal court threw out three other appointments Obama made that same day to the National Labor Relations Board (NLRB). The ruling has many Republican critics of the CFPB contending that Cordray’s appointment is just as illegitimate. That appointment is currently being challenged as part of a broader suit against the Dodd-Frank financial reform law that created the CFPB.

The NLRB is petitioning the U.S. Supreme Court to hear the case.

But Hensarling contends that that ruling is proof enough that Cordray is an unconstitutional appointee and will not treat him as CFPB director until he is confirmed by the Senate.

“You were appointed on the same day and in the exact same manner as these unconstitutional appointments,” he said in a letter to Cordray. “It is clear, as a number of legal scholars have concluded, that your appointment was also unconstitutional.

“You do not meet the statutory requirements of a validly-serving director of the CFPB, and cannot be recognized as such,” he added.

The refusal to hear testimony marks a new front in the long-running battle between congressional Republicans and the CFPB. Senate Republicans have said they will not consider any nominee to head the agency until several structural changes are made, including bringing its budget under Congress’s control and replacing the director position with a bipartisan board.

Hensarling said while Cordray cannot testify, he still expects the CFPB to comply with congressional requests for information, and to make other agency employees available to testify as needed.

Cordray is set to testify before the Senate Banking Committee on Tuesday, to deliver the agency’s semiannual report. No Republicans on that panel have publicly called for the committee to refuse his testimony.