A Texas state bank has standing under the Constitution to challenge the Dodd-Frank Act’s creation of the Consumer Financial Protection Bureau and the recess appointment of Richard Cordray as CFPB Director, the U.S. Court of Appeals for the District of Columbia has determined in State National Bank of Big Spring v. Lew.
The opinion partially overturned a 2013 decision by the U.S. District Court for the District of Columbia that dismissed the suit in full. According to the district court judge, the bank and the attorneys general did not have standing because they were unable to establish that the Dodd-Frank provisions caused or imminently threatened an injury.
The appellate court was careful to limit its decision only to whether the bank and the state officials have standing to sue. It expressed no opinion on the merits of any of the claims.
Challenged Dodd-Frank provisions. State National Bank of Big Springs and the attorneys general of 10 states claim that several Dodd-Frank Act consumer protection and financial stability provisions violate the U.S. Constitution in a number of respects. The bank also asserts that President Obama could not use his recess appointment authority to appoint Cordray as bureau director.
Specifically, the suit claims that:
- The organization of the CFPB is unconstitutional because independent agencies must be led by multiple-member commissions, not by a single director. Also Congress gave the CFPB so much power that the non-delegation doctrine was violated.
- President Obama exceeded his authority when he appointed Cordray during a three-day intra-session Senate recess. Under NLRB v. Noel Canning, three days was not long enough to allow the exercise of the recess appointment authority.
Challenge to CFPB. As a general rule, there is little doubt that a regulated company has standing to challenge the validity of a law or rule under which it is regulated, the court began. The Texas bank is regulated by the CFPB, and the bureau already has taken at least one action, the adoption of a rule on international remittance transfers, that has imposed obligations and costs on the bank. There was no reason not to follow the general rule and decide the bank has standing, the court decided.
When the bank should be permitted to bring the challenge was the second question. A regulated company should not be required to violate a law and risk enforcement penalties in order to challenge that law, the court said. That the bank was challenging the legality of the CFPB rather than the validity of a CFPB regulation was not relevant. The challenge was ripe.
Challenge to recess appointment. Little additional analysis or space was devoted to whether the bank could challenge Cordray’s recess appointment. The bank had standing to challenge the appointment, and the issue was ripe, for the same reasons, the court said.
However, the court explicitly noted that Cordray had subsequently been confirmed in the post by the Senate and thereafter had ratified everything he had done during the recess appointment. The significance of those facts had to be considered by the trial court.
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