On July 24, 2015, a federal court cleared the way for a small Texas bank to challenge the constitutionally of the Consumer Financial Protection Bureau (“CFPB”). In State National Bank of Big Spring, et al. v. Lew, et al ., the U.S. Court of Appeals for the District of Columbia held that the bank falls under the regulatory authority of the CFPB and may contest regulations issued by the CFPB.
Previously, the United States District Court for the District of Columbia had found that the bank lacked standing and dismissed the suit. By reversing this decision, the appellate court ensures that the case will move forward. The bank alleges that the CFPB is an independent agency which must be headed by several members, not an individual director. The bank also suggests that the President’s recess appointment of Richard Cordray, the CFPB’s Director, was illegal and that actions taken by Mr. Cordray before Senate confirmation were unlawful.
Congress created the CFPB in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) in the wake of the financial crisis. The CFPB’s stated mission is to protect consumers by regulating consumer finance markets.
If successful, this lawsuit may alter the structure of the CFPB and its regulatory authority. This blog will continue to monitor the pending litigation and discuss its implications for community banks and other financial institutions.