Bank Asks Court to Rule CFPB Unconstitutional

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By Chris Bruce

Nov. 9 — Congress' 2010 creation of the Consumer Financial Protection Bureau (CFPB) violated the U.S. Constitution, a Texas bank and its co-plaintiffs told a federal court.

The motion for summary judgment by State National Bank of Big Spring, Texas, marks the latest move in a 2012 lawsuit recently revived by the U.S. Court of Appeals for the District of Columbia Circuit.

The suit, which in effect asked the U.S. District Court for the District of Columbia to put the CFPB out of business, also seeks a ruling that CFPB Director Richard Cordray's January 2012 recess appointment violates the Constitution.

It also asked Judge Ellen S. Huvelle for a ruling that “all CFPB regulations promulgated during the time of Cordray's illegal appointment and that impact plaintiffs are invalid and cannot be enforced against plaintiffs.”

In a brief accompanying the Nov. 6 motion, the bank said that in the Dodd-Frank Act, Congress deliberately nullified the Constitution's system of checks and balances in its creation of the CFPB.

“Whatever the merits of this policy objective, the Constitution does not permit the amalgamation of such sweeping and unchecked authority in a single executive entity,” the brief said. “Certain features of the CFPB viewed in isolation may or may not be constitutionally permissible, but the combination cannot be reconciled with the text or structure of the Constitution. Fidelity to the Constitution requires that the CFPB be invalidated.”

Joining the bank in its suit are the 60 Plus Association, a nonprofit seniors advocacy group, and the Competitive Enterprise Institute, a nonprofit that favors limited government.

Dodd-Frank Challenge

The plaintiffs sued in 2012, mounting a broad challenge to major portions of the Dodd-Frank Act.

Huvelle threw out the suit in 2013, holding that the plaintiffs lacked standing (150 BBD, 8/5/13).

In July, the U.S. Court of Appeals for the District of Columbia Circuit upheld portions of Huvelle's ruling, but disagreed on others, finding standing for claims challenging the formation of the CFPB and Cordray's recess appointment by President Barack Obama (143 BBD, 7/27/15).

A CFPB spokesman Nov. 9 declined to comment on the case.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Seth Stern at sstern@bna.com