The Case against the Consumer Financial Protection Bureau: FAQ

Competitive Enterprise Institute General Counsel Sam Kazman answers 7 frequently asked questions about CEI’s legal challenge to the Consumer Financial Protection Bureau, State National Bank of Big Spring v. CFPB.

What is the Consumer Financial Protection Bureau (CFPB)?

The Consumer Financial Protection Bureau (CFPB) is a federal regulatory agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB was set up as an independent agency that receives its funding from the Federal Reserve, not through Congress, and it enforces 19 federal consumer protection statutes. The CFPB’s jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating within the United States.

Why is CEI challenging the CFPB in court?

From a policy standpoint, the CFPB uses its enormous power to damage major portions of the U.S. economy, restricting and driving up the cost of financial products like mortgages and credit. The CFPB acts in an arbitrary fashion, ignores due process for businesses and industries that it targets, and has reversed long-standing policy and procedures. More importantly, the establishment of this agency sets an extremely dangerous constitutional precedent. The CFPB’s director can only be fired by the President for specific causes, rather than at will. The CFPB is also not subject to Congress’ “power of the purse” for its annual budget. For these reasons, the agency is unaccountable to both the President and Congress, and is thus a fourth branch of government that is totally unauthorized by the Constitution. This vast amount of power centralized in a single agency would be dangerous under any circumstances, but its lack of accountability has allowed the CFPB to abuse and expand its authority in an especially reckless manner.

What are CEI’s legal arguments against the CFPB?

CEI is challenging the constitutionality of the CFPB. CEI alleges the CFPB’s formation and operation violate the Constitution’s separation of powers because the agency is insulated against meaningful checks by the legislative, executive, and judicial branches. Each of these factors alone should serve to invalidate the agency. In combination, they make the case against the agency even stronger.

Who will benefit if CEI prevails and how?

If CEI’s lawsuit succeeds, the CFPB will be made more accountable to the people and businesses affected by the bureau’s regulations. The CFPB will no longer be able to ignore due process based on its own whims or prejudices, harming businesses that serve consumers’ genuine needs. A CEI win will remove the ever-present threat of arbitrary CFPB action and its chilling effect, and as a result, industries will be free to invest in financial innovations that benefit the American people. We hope a positive ruling will also deter future Congresses from conjuring up more unaccountable agencies.

When and where did the lawsuit begin?

The lawsuit was filed on June 21, 2012, in the U.S. District Court for the District of Columbia. The case originally challenged the CFPB and two other Dodd-Frank entities: the Financial Stability Oversight Council and the Liquidation Authority, though it was later narrowed (see below). The State National Bank of Big Spring, Texas; the 60 Plus Association; and 11 states joined CEI as plaintiffs.

What major developments have occurred in the case?

In 2013, the district court dismissed CEI’s case for lack of standing, but on appeal, this ruling was reversed in part: State National Bank, together with CEI and 60 Plus, were held to have standing to challenge the CFPB. As a result, our case now focuses solely on the constitutionality of the CFPB.

What is the status of the case now?

As of March 2017, CEI is awaiting a ruling by the U.S. District Court judge.

The constitutional status of the CFPB is the subject of another court case as well: PHH Corp. v CFPB. In October 2016, the U.S. Court of Appeals for the District of Columbia found the CFPB’s structure to be unconstitutional because of its lack of accountability; specifically, that the President cannot remove the CFPB director at will. The court invalidated the Dodd Frank provision that allowed the director to be removed only for cause and ruled the President has authority to remove the CFPB director at will. CEI is hopeful that the PHH ruling will play a major role in imposing accountability on the CFPB and will strengthen CEI’s own case.

For more information on State National Bank of Big Spring v. CFPB, visit

For more information on the CFPB, see: