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More States Challenge Dodd-Frank Constitutionality

More states are joining an attempt to reverse the dismissal of a lawsuit challenging the constitutionality of the Dodd-Frank Act and its creation of the Consumer Financial Protection Bureau. 

The State National Bank of Big Spring, Texas is the original party to file a complaint in June 2012 challenging the Department of the Treasury, the CFPB, and others regarding the constitutionality of actions taken under the Dodd-Frank Wall Street Reform and Consumer Protection Act—including the appointment of the CFPB’s director. 

A district court dismissed the suit in August 2013, but the 11 states who joined the initial lawsuit are now asking the U.S. Court of Appeals for the D.C. Circuit to reverse that decision. On Tuesday, February 11, South Carolina, Oklahoma, Alabama, Georgia, Michigan, Kansas, Montana, Nebraska, Texas, Ohio, and West Virginia filed briefs to that effect with the appeals court. 

The lawsuit mentions the process by which Richard Cordray, director of the CFPB, assumed that role via a “recess” appointment by President Obama during a time when the Senate was not actually in recess

State National Bank in Texas, the original plaintiff, offers consumer financial services including remittance transfers, checking accounts, and agricultural and vehicle loans, but says it stopped offering new consumer mortgages due to the creation and operation of the CFPB, although it still services previously-issued mortgages.

The existence of the CFPB has increased State National Bank’s cost of doing business in several ways, it says, including the cost of complying with laws introduced through the Bureau’s “expansive” regulatory and enforcement powers; its ability to offer remittance transfers and consumer mortgages, and the cost of servicing outstanding mortgages, among others. 

Written by Alyssa Gerace

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