The United States District Court for the District of Columbia dismissed a challenge to Title X of the Dodd-Frank Act, which created the CFPB. Plaintiffs—a Texas federally-chartered bank, two advocacy groups, and eleven states—filed suit challenging the constitutionality of the CFPB and the appointment of Richard Cordray as director of the CFPB. In particular, plaintiffs alleged that the recess appointment of Mr. Cordray violated Article II, Section 2 of the Constitution—the Appointments Clause—because President Obama failed to obtain the “advice and consent” of the Senate. Defendants moved to dismiss the complaint arguing that plaintiffs lacked standing under Article III of the Constitution, or in the alternative, that plaintiffs’ claims were not ripe.
At the outset, the Court noted that other than the Texas federally-chartered bank, plaintiffs were not subject to regulation or supervision by the CFPB, and thus faced a significant hurdle in attempting to establish standing. In analyzing whether bank-defendant had standing, the Court noted that to have standing, the bank had to show some “certainly impending” harm resulting from a rule issued under Mr. Cordray’s directorship. Although to prove standing, the bank alleged that it suffered injury from compliance costs incurred and suffered injury from the CFPB’s remittance rules, mortgage servicing rules, and rules prohibiting unfair trade practices and acts, the Court ultimately held that the federally-chartered bank failed to make such a showing. Any compliance costs, according to the Court, were self-inflicted, as the bank voluntarily undertook such costs. The Court also rejected the bank’s alleged injuries based on specific rules issued by the CFPB. The Court held that the bank offered too few remittances to be subject to the CFPB’s remittance rules and the bank had never been subject to an enforcement action by CFPB related to any unfair trade practices or acts. Of import, the Court noted that at the time of filing the suit in June 2012, the CFPB’s mortgage servicing rules had not been issued, and thus, the bank identified no impending injury from any of them. The Court inferred that the bank’s decision to exit the mortgage lending business before rules were promulgated was based on a “generalized fear (or dislike) of the law, and not the mere possibility of increased costs associated with the rules governing mortgages.” As such, the Court held that all of the bank’s alleged injuries were too attenuated to confer standing, and too dependent on contingencies to present a ripe dispute.
The Court also dismissed challenges to two other provisions of the Dodd-Frank Act—the provisions establishing the Financial Stability Oversight Council and allowing for designation of certain entities as systemically important financial institutions and the provisions that established the Orderly Liquidation Authority—also for lack of standing and failure to present a ripe controversy.