Court Upholds Texas Bank’s Challenge to Legality of CFPB

This week’ fifth anniversary observance of the Dodd-Frank Act was capped off with a surprise: The U.S. Court of Appeals for the District of Columbia ruled that a Texas community bank can challenge the legality of the Consumer Financial Protection Bureau (CFPB) and the manner in which its director, Richard Cordray, was appointed by President Obama.

In a unanimous ruling, the court determined that State National Bank of Big Spring, Texas, could bring its legal challenge against the CFPB, which was created by the Dodd-Frank Act. The Bank had argued that the CFPB’s lack of accountability to any branch of government was unconstitutional, and it also questioned whether President Obama went outside of the law using a recess appointment to put Cordray in his job while Congress was operating under a pro forma session.

The court rejected arguments by the federal government that the bank was not impacted by the CFPB and could not bring a lawsuit, noting that State National Bank’s operations fell under CFPB oversight.

"There is no doubt that the bank is regulated by the Bureau," the Court ruled. "The bank therefore has standing to challenge the constitutionality of the Bureau."

Eleven states, the 60 Plus Association and the Competitive Enterprise Institute (CEI) joined the bank in its campaign.

“Since Dodd-Frank’s enactment five years ago this month, the CFPB has inflicted damage on huge segments of our economy,” said Sam Kazman, CEI’s general counsel. “Its powers are so free-roaming that they are unprecedented in our history. The fact that our standing to challenge the CFPB has been upheld is great news for us, the plaintiffs, and even greater news for the American public.”

The CFPB made no public comment on the court ruling.