The federal agency tasked with helping to protect consumers from misleading, costly and troublesome lending practices on the part of large banks now faces a suit from a smaller institution and two advocacy groups over the broad regulatory power it yields.
The State National Bank of Big Springs, Texas, along with the Competitive Enterprise Institute and the 60 Plus Association, have filed a lawsuit against the Consumer Financial Protection Bureau, according to a report from Reuters. In particular, the suit asks that parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act that created the CFPB be ruled unconstitutional because the agency faces little regulatory oversight from any branch of government. The lawsuit was filed in federal court with the U.S. District Court in Washington, D.C., late last week.
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Further, attorney C. Boyden Gray, who is representing the plaintiffs and was once the White House Counsel for President George H.W. Bush, notes that no agency has so many combined powers as the CFPB, the report said. However, the White House and CFPB both dismiss these claims as baseless, with the Obama administration vowing to fight the case. The CFPB only has regulatory power over banks with assets exceeding $10 billion, while the State National Bank has only about $300 million in assets and is therefore not beholden to the rules the agency sets forth. However, the suit argues that the rules it sets will impact the bank.
“This lawsuit appears to dredge up old arguments that have already been discredited,” CFPB spokeswoman Jennifer Howard told the news agency. “We’re going to keep our focus on the important work Congress created us to do – making markets work for consumers and responsible providers.”
The CFPB has faced considerable criticism since before it gained full regulatory power last July, and has only been subject to more since director Richard Cordray took office in January. Both the financial industry and Republican lawmakers would like to see its regulatory control over large financial institutions scaled back considerably, while advocates of the agency argue that it has enacted significant protections that have made a positive impact in borrowers’ lives in a relatively short period of time.
Image: jacqueline.poggi, via Flickr