June 26, 2012 – The Consumer Financial Protection Bureau is being sued by a Texas bank and two advocacy groups on the grounds that its powers are unconstitutional.
The State National Bank of Big Spring, Texas, the Competitive Enterprise Institute and the 60 Plus Association, an Alexandria, Va.-based free enterprise advocacy group, allege in a lawsuit filed June 22 in U.S. District Court in Washington D.C. that the Dodd-Frank Act effectively gives “unbounded power to the CFPB,” that far exceeds what is allowed under the U.S. Constitution.
The lawsuit not only challenges the creation of the agency, but also the appointment of CFPB Director Richard Cordray and the creation of the Financial Stability Oversight Council.
The suit claims that President Obama’s Jan. 4, 2012 recess appointment of Cordray was unconstitutional because it did not happen during an official Senate recess. At the time of the appointment, senators were on their winter break but still holding “pro forma” sessions to prevent such appointments.
The suit also alleges that the FSOC is unconstitutional because the council has “effectively unbridled discretion” to determine which banks are “too big to fail.” NCUA Chairman Debbie Matz is named as a defendant in the suit in relation to her role as serving on the FSOC.
The suit seeks to overturn the creation of the CFPB and the FSOC, as well as to prevent Cordray from using any of his powers as CFPB director.
NAFCU will continue to monitor and report on developments in the suit.