The State National Bank of Big Spring, Texas, the 60-Plus Association, and the Competitive Enterprise Institute filed suit against the Consumer Financial Protection Board alleging that the CFPB, as currently structured, is unconstitutional. Specifically the suit alleges that the CFPB lacks political accountability because, among other things, the President cannot remove the Bureau’s director save for cause and Congress cannot exercise control over the Bureau’s budget. Further, the suit notes, the Dodd-Frank statute limits judicial review of CFPB actions. “As a whole, Dodd-Frank aggregates the power of all three branches of government in one unelected, unsupervised and unaccountable bureaucrat,” commented former White House counsel C. Boyden Gray, who is representing the plaintiffs. Of note, CEI served as plaintiffs co-counsel in Free Enterprise Fund v. Public Company Accounting Oversight Board, which invalidated limitations on the removal of PCAOB members. CEI has more info on the suit here.
UPDATE: Boyden Gray and State National Bank of Big Spring CEO Jim Purcell have an op-ed in Friday’s WSJ on the unconstitutional aspects of the CFPB and the Financial Stability Oversight Council. Here’s an excerpt:
Dodd-Frank created both the Financial Stability Oversight Council and the Consumer Financial Protection Bureau, giving each agency effectively unlimited power. The FSOC can declare a financial firm “systemically important”—that is, too big to fail—based on “any” “risk-related factors” that it “deems appropriate.” And the CFPB can punish even responsible lenders who in good faith offer loans that the bureau later deems to be “unfair,” “deceptive” or “abusive.” . . .
Ordinarily, when regulators wield broad power, their discretion is still limited by checks and balances. The Constitution empowers the president and Congress, as well as our courts, to prevent regulators from running amok with excessive, arbitrary or even partisan regulations.
But Dodd-Frank does not honor checks and balances. It eliminates them. The CFPB is not subject to Congress’s “power of the purse,” which James Madison knew to be Congress’s “most complete and effectual weapon.” Instead, Dodd-Frank lets the CFPB claim more than $400 million from the Federal Reserve each year and prohibits Congress from even reviewing that budget. The president’s control over the CFPB is limited because by law he can remove the agency’s director only under strictly limited circumstances. Finally, Dodd-Frank limits the courts’ review of CFPB’s legal interpretations. . . .
The FSOC is similarly free from checks and balances. For example, when the Council—a working group of the Treasury secretary, Federal Reserve chairman, comptroller of the currency, and other unelected regulators—anoints a financial institution as too big to fail, the courts are prohibited from even reviewing whether the regulators properly interpreted the applicable laws.