Challenging Dodd-Frank: State National Bank of Big Spring v. Mnuchin


The Competitive Enterprise Institute, the 60 Plus Association, and the State National Bank of Big Spring, Texas brought a lawsuit in 2012 challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB). The CFPB is a regulatory agency that has used its enormous, unchecked power to restrict and drive up the cost of financial products like mortgages and credit. 

The lawsuit argued that the structure of the CFPB violates the Constitution’s separation of powers because the agency is insulated against meaningful checks by the legislative, executive, and judicial branches of government.

For example, unlike other agency heads, the CFPB’s director can only be fired by the president for specified causes. Normally, agency heads serve at the will of the president, an arrangement that makes an appointee more responsive and accountable to the president and, by extension, the American people.

Also, unlike other regulatory agencies, Congress has no power to approve or disapprove the CFPB’s budget. Instead, the CFPB budget is taken from the budget of the Federal Reserve, which is the central banking system of the United States. That funding arrangement means the CFPB is not subject to Congress’s “power of the purse,” and it severely worsens the agency’s unaccountability. In effect, the CFPB functions like a fourth branch of government, unauthorized by the Constitution.

The lawsuit was originally filed on June 21, 2012 and challenged the constitutionality of several major provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act: the CFPB, the Financial Stability Oversight Council, and the Liquidation Authority. Within months, the lawsuit was joined by 11 states.

In August 2013, a federal judge dismissed the lawsuit in a decision that ignored the very real harm Dodd-Frank inflicted on the plaintiffs and on many Americans who depend on banks to provide loans for everything from their home to their small business. That ruling was subsequently overturned in large part in July, 2015 by a three-judge panel of D.C. Circuit Court, which affirmed that the bank, CEI, and the 60 Plus Association had standing to challenge both the CFPB and the validity of President Obama’s 2012 recess appointment of its director, Richard Cordray. On those issues, the court remanded the case back to the district court for a ruling on the merits of the case. Unfortunately, at the same time, the appeals court also upheld other parts of the district court’s decision regarding the lack of standing of the eleven states.

But, our case was put on hold by the district court pending the D.C. Circuit’s consideration of another court case, PHH Corp. v CFPB. In October 2016, a three-judge panel found the CFPB’s structure to be unconstitutional because its director could not be removed at will by the president. But on January 31, 2018, the en banc circuit court overturned the panel’s 2016 decision, effectively giving future heads of agencies like the CFPB enormous power with scant accountability.

In the wake of this ruling, the district court in our case granted a joint motion for judgment against us in February 2018. That ruling was summarily affirmed by the D.C. Circuit on June 8, 2018. We filed a petition for certiorari with the Supreme Court on September 6, 2018, but our petition was subsequently denied on January 14, 2019.

>> Read our related Brief of Amicus Curiae in PHH Corp v. CFPB.