Skip to main content

Court Upholds Texas Bank’s Challenge to Legality of CFPB

Jul 24, 2015
Judges Gavel Pic

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.

About the author
Jul 24, 2015
How Burnett v. NAR Will Impact The Mortgage Industry

Decision could make process harder for first-time buyers

First National Bank of Pennsylvania Settles Redlining Charges For $13.5 Million

Justice Department accuses major mortgage lender of discriminating against Black and Latino homebuyers in North Carolina.

FHA Announces New Rule Easing Branch Office Registration

Effective March 4, the Federal Housing Administration's updated regulation promotes broader participation in FHA programs, benefiting smaller loan originators and credit unions.

Patriot Bank Settles With DOJ Over Alleged Redlining In Memphis

Tennessee-based lender agrees to $1.9 million settlement amid allegations of discriminatory lending practices in minority neighborhoods.

Appraisal Showdown In The Lone Star State

Clash of perspectives on appraisal bias sparks debate

California Mortgage Lender Faces Cease And Desist Order In Connecticut Over Unlicensed Originators

Connecticut banking commissioner alleges violations of Truth in Lending and Fair Credit Reporting Act.