D.C. Circuit Court Ruling Revives Lawsuit Challenging CFPB’s Constitutionality
The U.S. Court of Appeals for the D.C. Circuit on July 24 revived a constitutional challenge to the CFPB and the appointment of Director Richard Cordray, overturning a 2013 decision that State National Bank of Big Spring, Texas, did not have standing in the lawsuit.
The small Texas bank filed its lawsuit in June 2012, challenging the constitutionality of the CFPB’s formation and President Obama’s appointment—during a Congressional recess—of its director, Richard Cordray. The bank charged that the CFPB’s formation and operation under the Dodd-Frank Act violates the Constitution’s separation of government powers because the agency has broad authority and operates independently from other agencies.
More than a year later, in August 2013, U.S. District Judge Ellen Segal Huvelle dismissed the Texas bank’s case, determining it wasn’t “ripe for review,” because the plaintiffs had not faced any adverse rulings or agency action.
The D.C. Circuit Court’s three-judge panel unanimously reversed Judge Huvelle’s ruling, concluding the Texas bank has standing to challenge the CFPB’s constitutionality because it’s regulated by the agency and, therefore, can challenge a law under which it’s regulated. The example the court cited was the CFPB’s Remittance Rule, which imposes new obligations on State National Bank, which the bank claims have increased its compliance costs. “The bank is not a mere outsider asserting a constitutional objection to the bureau. The bank is regulated by the bureau,” Circuit Court Judge Brett Kavanaugh wrote in the decision.
Under the same logic, Judge Kavanaugh also noted that because State National Bank is under the authority of CFPB Director Cordray, it has standing to challenge the constitutionality of Cordray’s appointment to head the agency. The D.C. Circuit Court did not rule on the merits of either question.