WASHINGTON (Reuters) - A federal appeals court handed a Texas bank a small victory on Friday, ruling that it has legal standing to challenge the constitutionality of the U.S. Consumer Financial Protection Bureau and the appointment of the bureau’s director.
In a unanimous decision, the U.S. Court of Appeals for the District of Columbia Circuit found the State National Bank of Big Spring “is not a mere outsider asserting a constitutional objection to the bureau” and is subject to the bureau’s rule-making powers.
“There is no doubt that the Bank is regulated by the Bureau,” the ruling said. “The Bank therefore has standing to challenge the constitutionality of the Bureau.”
A spokesman for the CFPB said it was still reviewing the court’s opinion.
The CFPB is a new regulatory body created by the 2010 Dodd-Frank Wall Street reform law. The regulator is tasked with protecting consumers from predatory lending practices by institutions such as banks, credit card companies and auto lenders.
Since its creation, however, there have been efforts both by Republicans and by the industry to undercut its authority, largely driven by concerns about the bureau’s structure and its powers over a wide array of financial products. The bureau is led by a single director, Richard Cordray, and is not subject to congressional appropriations.
The two legal challenges will now be remanded back to a lower district court for consideration.
Meanwhile, the appeals court on Friday rejected a third request by the bank to challenge the constitutionality of the Financial Stability Oversight Council, another body created by Dodd-Frank that polices for emerging market risks.
The court said the bank does not have standing for that challenge.
It also rejected a separate challenge filed by a group of state attorneys general over the constitutionality of Dodd-Frank’s orderly liquidation provisions, saying they did not have legal standing.
In a statement, the bank’s CEO Jim Purcell said Friday he is “gratified” by the chance to put the CFPB to the test.
“As a small community bank out in West Texas, we’ve always felt pretty vulnerable to the regulatory burdens imposed on us by Washington, D.C.,” Purcell said.
“In recent years, that threat was epitomized for us by the Consumer Financial Protection Bureau, an agency which was alarmingly free of traditional checks and balances.”
Reporting by Lawrence Hurley and Sarah N. Lynch; Editing by Bill Trott and Phil Berlowitz