Lawsuit Challenging CFPB Constitutionality Moving Forward

The Consumer Financial Protection Bureau (CFPB) may be facing a legal challenge to its very existence.

Friday (July 24), the U.S. Court of Appeals for the District of Columbia Circuit ruled that the State National Bank of Big Spring, a small West Texas bank, could proceed with its lawsuit challenging the constitutionality of the agency itself. The D.C. decision, which was handed down by a three-judge panel, reversed a trial judge’s 2013 decision that had thrown out that lawsuit.

According to an article by The Wall Street Journal, the case itself has been monitored and backed by conservatives and libertarians, who have been opposed to the very existence of the agency, which traces its genesis to the creation of the Dodd-Frank financial law five years ago.

According to the suit filed in 2012 by the Texas bank, the very formation and operation of the CFPB is under dispute, with the key argument tied to the contention that the Dodd-Frank mandates violate separation of power as the CFPB has broad powers largely unchecked by other agencies. That suit also goes so far as to challenge Richard Cordray’s installment as head of the agency three years ago.

The actual ruling by the D.C. court did not in fact consider the “merits of the bank’s constitutional claims,” according to WSJ, opting instead to recommend that a trial court consider the issue of constitutionality.

Other issues decided by the D.C. court said that the Texas bank did not have the ability to challenge the existence of the Financial Stability Oversight Council, which, as also created by Dodd-Frank, oversees U.S. financial system stability.

Among other plaintiffs joining with the Texas bank: the libertarian Competitive Enterprise Institute, which mounted a challenge against the Obama health care laws that took effect in recent years. That challenge was unsuccessful.


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