The lawsuit will ask the court to overturn certain provisions of the 2010 Dodd-Frank Act related to the CFPB’s “unlimited regulatory power.” The plaintiffs maintain that certain parts of Dodd-Frank are unconstitutional, as the CFPB is not subject to supervision by the president and courts and the agency’s budget is not subject to the congressional appropriations process, Reuters reports.
“There is no statute anywhere that so combines the power of all three powers in one bureaucrat,” C. Boyden Gray, previously White House counsel under former president George H.W. Bush and current counsel for the plaintiffs, said, according to Reuters.
CFPB spokeswoman Jennifer Howard said that the lawsuit against the consumer watchdog agency relies on outdated logic.
“This lawsuit appears to dredge up old arguments that have already been discredited,” Howard said, according to Reuters. “We’re going to keep our focus on the important work Congress created us to do—making markets work for consumers and responsible providers.”
The plaintiffs maintain that the Texas bank, which has less than $300 million in assets, will be adversely affected by the CFPB’s rules and enforcement in mortgage servicing, as well as other consumer products.
“No other federal agency or commission operates in such a way that one person can essentially determine who gets a home loan, who can get a credit card and who can get a loan for college,” State National Bank CEO Jim Purcell said in a statement, Reuters reports. “Dodd-Frank effectively gives unlimited regulatory power to this so-called [CFPB]…with a director who is not accountable to Congress, the President or the Courts. That is simply unconstitutional.”
The lawsuit also goes against the Financial Stability Oversight Council’s designation of some firms as “systemically important financial institutions” — or SIFIs. The plaintiffs argue that these designations will increase borrowing costs for community banks, as the designation would imply government backing.