* CFPB to be sued by small bank, advocacy groups
* Challenge focuses on oversight, checks and balances
* Suit slated to be filed later on Thursday
By Alexandra Alper
WASHINGTON, June 21 A small bank and two
conservative advocacy groups said on Thursday that they would
file a lawsuit against the new Consumer Financial Protection
Bureau, challenging what they call the agency's "unlimited
It is unclear how much of a threat the lawsuit is to the
agency created by the 2010 Dodd Frank financial reform act to
police consumer products such as mortgages and credit cards.
The challenge, brought by the State National Bank of Big
Spring, Texas; the Competitive Enterprise Institute; and the 60
Plus Association, will ask the court to invalidate key parts of
Dodd-Frank relating to the CFPB's oversight.
The plaintiffs say parts of the law are unconstitutional
because Congress does not have direct control over the CFPB's
budget, while the president and the courts lack serious
oversight of the agency.
"There is no statute anywhere that so combines the power of
all three powers in one bureaucrat," said C. Boyden Gray, who
was White House counsel under former President George H.W. Bush
and is representing the plaintiffs.
The plaintiffs said they expected the lawsuit to be filed
later on Thursday.
But the White House has already vowed to fight it.
President Barack Obama "will continue to fight any effort
from our opponents to weaken the CFPB or water down its ability
to protect middle-class families," White House spokeswoman Amy
The CFPB also dismissed the arguments out of hand.
"This lawsuit appears to dredge up old arguments that have
already been discredited," CFPB spokeswoman Jennifer Howard
said. "We're going to keep our focus on the important work
Congress created us to do - making markets work for consumers
and responsible providers."
Dodd-Frank tasks the CFPB with supervising banks with more
than $10 billion in assets, but smaller banks can be subject to
The plaintiffs argue that the Texas bank, with less than
$300 million in assets, will suffer because of rules the agency
writes to police mortgages and other consumer products the bank
"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 Chief Executive Officer Jim
Purcell said in a statement.
"Dodd-Frank effectively gives unlimited regulatory power to
this so-called Consumer Financial Protection Board, also known
as CFPB, with a director who is not accountable to Congress, the
President or the Courts," Purcell said in a statement. "That is
The lawsuit also targets the Financial Stability Oversight
Council, a coalition of existing regulators called for in
Dodd-Frank to study risk in the financial system.
The FSOC's designation of certain banks as "systemically
important" will raise borrowing costs for smaller banks because
the designation will come with implicit government backing, the
They also charge that the FSOC's oversight of the CFPB is
IN THE LINE OF FIRE
The CFPB is already under fire from the right for the
appointment of its director and the way the agency is
Obama in January installed Richard Cordray as the CFPB's
first director through a recess appointment after Senate
Republicans blocked a vote on his nomination in December.
"As it is currently structured, the CFPB is one of the most
powerful and least accountable agencies in all of Washington,"
Republican Congressman Spencer Bachus, chairman of the House
Financial Services Committee, said in a statement about the
A bill sponsored by Bachus to replace the CFPB director with
a five-member commission passed the Republican-controlled House,
but has an uncertain future in the Democratically held Senate.
A judge tossed out a court challenge to the president's
January recess appointments to another agency, the National
Labor Relations Board, in March.
The lawsuit against the CFPB will be filed in the U.S.
District Court of the District of Columbia, the plaintiffs said.