Consumer Finance Litigation

Most constitutional challenges to agency action arise as a defense to an enforcement action. However, State National Bank of Big Spring, Texas (the "Bank") has led a constitutional challenge to the very existence and structure of the Consumer Financial Protection Bureau ("CFPB") from day one. The CFPB was created by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The Bank's ambitious challenge to the constitutionality of the CFPB is rooted in five core arguments: 1) as an independent agency, the CFPB could not be headed by one person, Director Richard Cordray ("Cordray"), but rather needed a panel or board, 2) Congress violated the non-delegation clause with its broad grant of general regulatory authority to the CFPB, 3) the recess appointment of Cordray during a mere three day recess was unconstitutional and rendered unconstitutional his actions from his recess appointment on Jan. 4, 2012 to his full appointment on July 1, 2013, 4) the Financial Stability Oversight Counsel's ability to designate "to big to fail" enterprises was unconstitutional under the separation of powers and non-delegation doctrines, and 5) the Dodd-Frank Act's grant of "liquidation authority", which allows it to reorder creditor priority during the liquidation of a financial institution, allegedly in contravention of established bankruptcy law violated the bankruptcy clauses uniformity requirement. The United States District Court hearing the case dismissed the complaint, in its entirety, on standing and ripeness grounds. However, on appeal, the D.C. Circuit Court of Appeals reversed as to 3 out of 5 arguments, and held that the first arguments 1,2, and 3 above were both ripe and within the Bank's standing to pursue. The opinion of the DC Circuit Court obviously does not delve into the merits of the five arguments above. That is for a future opinion which will undoubtedly result regardless of which way the District Court rules on the merits. The opinion of the DC Circuit is however noteworthy both as an instructive decision for future constitutional challenges against agency rulemaking authority and because it keeps alive the Bank's ambitious constitutional challenge of fundamental aspects of the CFPB which, if ultimately successful, would have wide-reaching implications for the financial sector and the existence of the CFPB itself. The opinion was issued in State National Bank of Big Spring, et al. v. Jacob J. Lew, et al. 13-5247 (D.C. Cir. July 24, 2015). The lower court proceedings of the same name are assigned case number 12-cv-01032, and are presently pending in the United States District Court for the District of Columbia. The full opinion of the D.C. Circuit Court of Appeals can be found on their website here.