According to U.S. District Court records filed in Washington, plaintiffs include the $275 million State National Bank of Big Spring, located in Big Spring, Texas; non-profit think tank The Competitive Enterprise Institute, and the 60 Plus Association, an Alexandria, Va.-based senior citizen advocacy group.
The organizations challenge the constitutionality of the formation of the CFPB and the Financial Stability Oversight Council, both mandated by the Dodd-Frank Act, and President Barack Obama’s Jan. 4, 2012 recess appointment of Director Richard Cordray, which did not occur during an official Senate recess.
Titles I and X of the Dodd-Frank Act, which created the CFPB and FSOC, “compromise unprecedented violations of the basic concept of separation of powers and the checks and balances,” the suit claims.
The FSOC has the discretion to designate nonbank financial companies as “too big to fail”, which signals that such companies have the backing of the federal government, and give them an unfair advantage over competitors in attracting investment capital, the suit claims.
Matz is involved in the suit in both her official capacity as chairman of the NCUA, and as an ex officio member of the FSOC. Members of the council include nonvoting state officials appointed by state regulators, not the president, which insulates them from judicial review brought by an injured third party, according to the complaint.
“These provisions provide the FSOC virtually boundless discretion in making its highly consequential designations, a violation of the separation of powers,” the suit claims.
Matz joins a who’s who of defendants that include Cordray, U.S. Treasury Secretary Timothy Geithner, Federal Reserve Board Chairman Ben Bernanke and FDIC Acting Chairman of the Board Martin Gruenberg.
The bank claims CFPB’s “burdensome requirements” have forced it to stop providing remittance services, and conducts business “under a cloud of regulatory uncertainty”, because the CFPB could “retroactively announce that one or more of the bank’s consumer lending practices is ‘unfair’, ‘deceptive’, or ‘abusive’.”
The CFPB’s regulatory methods have had a “chilling effect” on banks that caused the plaintiff to stop offering residential mortgages, the suit claims.
The 60 Plus Association claims CFPB’s regulations have limited financial services available to seniors, including free checking and mortgages. The Competitive Enterprise Institute claims its accounts at banks and brokerage firms are “jeopardized by the CFPB’s sweeping regulatory authority.”
The suit seeks to overturn the creation of the CFPB and the FSOC, as well as to prevent Cordray from using any of his powers as CFPB director.