The U.S. Consumer Financial Protection Bureau (CFPB) now faces legal uncertainty in light of the recent federal appeals court ruling that President Barack Obama's recess appointments to the National Labor Relations Board were unconstitutional. The decision raises questions about the legality of Richard Cordray's recess appointment as director of the agency, which could mean that the agency's rules affecting the financial market and mortgages are invalid if Cordray's appointment is similarly invalidated. A similar challenge to Cordray's appointment has been filed in U.S. District Court, and if the court rules against the appointment, the CFPB's authority over fair mortgages to the regulation of prepaid cards would be called into question. Additionally, the agency could be prevented from issuing new rules, but the CFPB has said the appellate court ruling has no impact on the agency. Experts suggest that some of the rules issued by the CFPB were issued through its authority from the Federal Reserve and other agencies, and that the U.S. Treasury could assume some of those powers in a pinch. "I don't anticipate that financial-service providers will disregard final CFPB regulations while waiting for this to play out in the courts," said Laurence Platt, a banking-industry lawyer with K&L Gates LLP in Washington.
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