In what could prove to be a new pathway for credit unions looking to escape burdensome regulations set forth by the CFPB, a three-judge panel from the D.C. Circuit Court ruled unanimously that a small community bank in Texas had the standing to challenge the constitutionality of the CFPB.
The suit was originally shot down by a judge in the lower court, ruling the plaintiffs didn't have the standing to challenge the agency.
The State National Bank of Big Spring, Texas, and its co-plaintiffs, the Competitive Enterprise Institute and the 60 Plus Association, filed a suit against the CFPB after the bank was unable to continue issuing mortgage loans to lenders and complete wire transfers due to CFPB rules. John Berlau, a senior fellow at CEI, said his think tank had long been bothered by the lack of accountability of the CFPB and that the bureau's practices raise multiple constitutional issues.
The suit is not focused on the injuries caused by the CFPB to small financial institutions due to the bureau's rule interpretations, but rather on a lack of checks and balances. He said 11 states have signed on to the case.
Berlau said the issue is that the CFPB is not subject to congressional accountability through the appropriations process, lacks a multi-member leadership and was appointed initially by a “recess” process – the same process that the Supreme Court ruled as illegal for the National Labor Relations Board.
Berlau said he is optimistic and very glad that the victory was bipartisan and unanimous.
“We look forward to pressing this,” he said.
However, the three-judge panel did not give the plaintiffs everything they had asked for. The court ruled they did not have standing to challenge Dodd-Frank's Financial Stability Oversight Council and Orderly Liquidation Authority.
In a recent online post, Berlau said the plaintiffs are evaluating their options in that regard.
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