The CFPB has filed a motion to dismiss in State National Bank of Big Spring, Texas, et al. v. Geithner, et al., the case currently pending in federal district court in Washington, D.C. that includes a challenge to President Obama’s recess appointment of Director Cordray.
The case was originally filed in June 2012 by State National Bank of Big Spring, Texas and two non-profit organizations in the metropolitan Washington, D.C. area. On September 20, an amended complaint was filed adding as plaintiffs the Republican state Attorneys General of Oklahoma, South Carolina and Michigan.
In the amended complaint, SNB and the non-profit organizations alleged that certain provisions of Dodd-Frank creating the CFPB were unconstitutional and Director Cordray’s recess appointment was invalid because the Senate was not in recess at the time of the appointment. In particular, SNB and the non-profits alleged that the CFPB’s authority to prohibit unfair, deceptive or abusive acts or practices violates separation of powers because such authority is unconstrained by meaningful checks and balances. (The state AGs did not join the portions of the amended complaint challenging the CFPB’s constitutionality or Director Cordray’s appointment. Instead, they only joined a newly-added challenge to the provisions in Title II of Dodd-Frank that give the Treasury Secretary “orderly liquidation authority” over financial companies.)
The CFPB filed its motion to dismiss jointly with the other named defendants, who included the Treasury Department, the other federal banking agencies and the SEC. The defendants argue that SNB’s claim that the regulatory uncertainty created by the Bureau’s UDAAP authority caused SNB to exit the mortgage lending business does not give SNB standing to challenge the CFPB’s constitutionality or Director Cordray’s appointment. In support of their argument, the defendants assert that the CFPB has no direct enforcement authority over SNB because the bank has less than $10 billion in assets, and that any enforcement action by the OCC based on a Bureau regulation or guidance or the Bureau’s recommendation is entirely speculative. In response to SNB’s claim that it stopped providing remittance transfers due to the compliance costs associated with the Bureau’s remittance transfer regulation, the defendants argue that because the regulation was promulgated pursuant to the CFPB’s authority to implement the Electronic Fund Transfer Act rather than its UDAAP authority, the regulation does not give SNB standing to challenge the CFPB’s constitutionality based on its UDAAP authority.
The defendants also assert that the non-profit plaintiffs have failed to show any injury sufficient to give them standing to challenge the CFPB’s constitutionality or Director Cordray’s appointment. In further support of their motion, the defendants argue that the claims of SNB and the non-profits are not ripe because they have not shown any imminent threat of harm resulting from CFPB action that requires judicial intervention.
Another pending case that could have implications for the validity of Director Cordray’s appointment is Noel Canning v. National Labor Relations Board, which is before the U.S. Court of Appeals for the D.C. Circuit. That case challenges the National Labor Relations Board’s authority to take various actions based on the alleged invalidity of President Obama’s recess appointment of three individuals to the NLRB.