A Texas federally-chartered bank and other advocacy groups have filed suit in the United States District Court for the District of Columbia challenging the constitutionality of the CFPB and the appointment of Richard Cordray as Director of the CFPB. The lawsuit also challenges the constitutionality of the Financial Stability Oversight Council created under the Dodd-Frank Act to respond to financial risks to the financial stability of the U.S. financial system. The lawsuit alleges that the CFPB and the Council violate the separation of powers doctrine under Article I, Section 1 of the Constitution. For example, plaintiffs argue that because Section 1031(a) of the Dodd-Frank Act, which permits the CFPB to take any action over unfair, deceptive and abusive practices in connection with the offering of a consumer financial product or service, does not define “unfair” or “deceptive” acts or practices, the CFPB essentially has “unbridled authority.” The lawsuit also alleges that Director Cordray’s appointment is unconstitutional because President Obama failed to obtain the “advise and consent” of the Senate, as required under Article II, Section 2 of the Constitution.
Alert June 26, 2012