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 Unchecked Power of Consumer Financial Protection Board Unconstitutional

Amended Complaint in PDF - September 20, 2012
Original Complaint in PDF
- June 21, 2012

 WASHINGTON, D.C., June 21, 2012 – The State National Bank of Big Spring, Texas, today filed a lawsuit asking the U.S. District Court for the District of Columbia to hear its case challenging the constitutionality of provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Competitive Enterprise Institute and the 60 Plus Association are also joining this community bank as plaintiffs in the same action, requesting the Court to invalidate the law because of the unprecedented, unchecked power it gives the government.

“No other federal agency or commission operates in such a way that one person can essentially determine who gets a home loan, who can get a credit card and who can get a loan for college,” said Jim Purcell, CEO of State National Bank. “Dodd-Frank effectively gives unlimited regulatory power to this so-called Consumer Financial Protection Board, also known as CFPB, with a director who is not accountable to Congress, the President or the Courts. That is simply unconstitutional.”

No Checks and Balances

According to the complaint, there are no effective checks and balances to assure the public of accountability.  Most importantly:

  • Congress exercises no “power of the purse” over the CFPB, because the agency’s budget – administered essentially by one person – comes from the Federal Reserve, amounting to approximately $400 million that Congress cannot touch or regulate.
  • The President cannot carry out his constitutional obligation to “take care that the laws be faithfully executed,” because the President cannot remove the CFPB Director except under limited circumstances.
  • Judicial review of the CFPB’s actions is limited, because Dodd-Frank requires the courts to give extra deference to the CFPB’s legal interpretations.
  • The plaintiffs claim in their suit that Dodd-Frank gives an agency of unelected government bureaucrats unrestrained power. They argue this unaccountable power over the daily lives of the American people results in a lack of public accountability, creating a power grab over every U.S. citizen.

“As a whole, Dodd-Frank aggregates the power of all three branches of government in one unelected, unsupervised and unaccountable bureaucrat,” said former White House Counsel C. Boyden Gray, attorney for the plaintiffs and founder of Boyden Gray & Associates.

"Dodd-Frank is to financial reform like a tsunami is to a slightly dry lawn — all-enveloping, hugely destructive, and pretty much unaccountable to whoever unleashed it," said Sam Kazman, CEI General Counsel.

While some in the Obama Administration argue that the CFPB will be overseen by the Dodd-Frank Financial Stability Oversight Council, the FSOC's review is practically nonexistent. It can overturn a CFPB regulation under only limited circumstances, and even then only if seven of the 10 FSOC members, including the CFPB Director himself, vote to overturn the CFPB's rule.  Most importantly, the Council has no power to oversee the CFPB's enforcement activities, which is the CFPB's preferred method of lawmaking.

Statement by Hans Bader, CEI attorney:

The Consumer Financial Protection Bureau's lack of checks and balances violates the Constitution’s separation of powers. Its Director is like a czar.  He is not accountable to anyone, and can't be fired even if voters elect a president with different ideas about how to protect consumers.  The usual rule under our Constitution is that the president can fire department heads at will, as the Supreme Court made clear in its Myers v. U.S. decision of 1926, which struck down a contrary law. An exception to this rule covers multimember agencies with a "quasi-legislative" role. But that exception doesn't cover the CFPB, which is headed by a single leader not subject to collegial oversight.  The CFPB’s Director is as different from traditional independent agencies as a dictator is from a legislature.  Unlike the Chairman of an independent agency like the SEC, who can be outvoted by fellow commissioners if he oversteps his authority, the CFPB’s director is accountable to no one. He is not accountable to the democratically-elected President, unlike cabinet secretaries, who can be removed at will by the President.  If the CFPB’s sole director can be given immunity from removal, so, too, could cabinet secretaries, who could be given life tenure, enabling them to thwart the very changes that a newly-elected President was elected to carry out.

Statement by Jim Martin, Chairman of The 60 Plus Association, Inc.:

The Dodd-Frank Wall Street Reform and Consumer Protection Act may sound like a badly needed law.  In fact, it’s a monster of a statute, larger even than Obamacare, that regulates practically every financial service and institution in the country.  And it does this in ways that are unconstitutional.  Its Consumer Financial Protection Bureau is headed by a single finance czar who’s unaccountable to the President, to Congress, and in a sense even to the courts.

Now Dodd-Frank sounds like it will give seniors reform and protection, but in fact it will restrict financial products such as mortgages and credit, and make them more expensive to boot.  At the same time, it undermines the Constitution’s checks on government power.  It’s a law that cries out for judicial scrutiny.

For additional information, please contact Christine Hall, 202.331.2258,


Three States Join Constitutional Challenge to Dodd-Frank

New Orderly Liquidation Authority Threatens Financial Companies and Investors, Putting State Pension Funds at Risk Without Due Process

Washington, D.C., September 20, 2012 – The states of Oklahoma, South Carolina, and Michigan today joined a lawsuit challenging the constitutionality of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The states are asking the U.S. District Court for the District of Columbia to review the constitutionality of the Orderly Liquidation Authority, established under Title II of Dodd-Frank. The three states are joining the original plaintiffs in the lawsuit: State National Bank of Big Spring, Texas; the 60 Plus Association; and the Competitive Enterprise Institute.

“We must challenge Dodd-Frank to protect Oklahoma taxpayers and our financial stability. The law puts at risk the pension contributions and tax dollars that the people have entrusted us to protect,” Oklahoma Attorney General Scott Pruitt said. The Orderly Liquidation Authority (OLA) gives the Treasury Secretary the power to liquidate any financial company as along as the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve are in agreement.

“The new regulations do not stabilize our economy, they create greater uncertainty. As a result, States cannot allow our taxpayers, our investments or the Constitution to be subject to such financial risk. Dodd Frank replaces the rule of law with the rule of politics,” Attorney General of South Carolina, Alan Wilson, said. The unbridled power given to the OLA to seize assets of private companies is simply unconstitutional. If a large financial institution fails, holding state pension contributions and tax dollars, the states have very little ability to recover their citizens’ assets.

Sam Kazman, General Counsel for one of the original plaintiffs, CEI, stated:  “Despite being called a reform measure, Dodd-Frank poses a massive threat to consumers, companies and the economy of this country.  The scope of that threat is clearly demonstrated by the decision of these three states to join our lawsuit, and we welcome their participation.”

The state attorneys general are challenging Title II of Dodd-Frank, which gives the Treasury Secretary the ability to liquidate financial companies with only 24 hours notice. There is no meaningful legal recourse for the company, there is an immediate gag order placed on all parties and it carries criminal penalties if violated; in short, this creates death panels for American companies. The private plaintiffs also are challenging the Financial Stability Oversight Council (Title I), the Consumer Financial Protection Bureau (Title X), and the validity of the Bureau Director’s appointment.

The lawsuit was originally filed in June 21, 2012.

Eight More States Join Constitutional Challenge to Dodd-Frank Act

Eleven States Now Challenge Dodd-Frank’s Orderly Liquidation Authority, Which Exacerbates “Too Big To Fail” and Puts State Pensions and Other Funds at Risk

WASHINGTON, D.C., February 13, 2013 – In an attempt to protect their pension funds, taxpayers and financial stability, the states of Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia today join a major lawsuit challenging the constitutionality of the Dodd-Frank Wall Street Reform and Consumer Protection Act. > Read more

> View a copy of the amended complaint

> View the government's Motion to Dismiss of November 20, 2012 and statement by CEI General Counsel Sam Kazman

> View Private Plaintiffs' Opposition to Motion to Dismiss of February 27, 2013

> View States' Opposition to Motion to Dismiss of February 27, 2013

> View District Court grant of motion to dismiss of August 1, 2013





  • House Financial Services’ Oversight and Investigations Subcommittee - How DFA Affects Local Communities - Testimony by Jim Purcell, president and CEO of State National Bank in Big Spring, Texas, July 19, 2012