Panel created by financial reform law
WASHINGTON – As the Supreme Court prepares to rule on health care reform, a new lawsuit is taking aim at another of President Barack Obama’s signature accomplishments – creation of the Consumer Financial Protection Bureau.
A Texas bank and two free market advocacy groups are challenging the constitutionality of the agency, which was the centerpiece of the 2010 Dodd-Frank financial reform law. The suit alleges that the agency was given too much power and that Obama’s recess appointment of Richard Cordray as its director was unconstitutional.
The suit also challenges the law’s creation of a panel of regulators, the Financial Stability Oversight Council.
The main focus of the suit is the consumer bureau, which has been strongly opposed by many financial and business groups, as well as most Republicans in Congress. They have argued there is little congressional oversight of the bureau because it gets its funding directly from the Federal Reserve and not through the appropriations process, and its independent director is largely unconstrained by the White House or the courts.
“There is no example that any of us can find of any aggregation of such power in the hands of an unelected bureaucracy free of any kind of constraints by any of the branches of government,” said C. Boyden Gray, the lead attorney in the suit.
“If you’re a poor beleaguered financial institution and you are set upon by this bureau, you have no access to the democratic system – to the White House, the Congress or the courts – to appeal what’s happened,” said Gray.
The suit was filed Thursday in U.S. District Court in Washington, D.C., by the State National Bank of Big Spring, Texas; the 60 Plus Association, a senior citizen advocacy group in Alexandria, Va.; and the Competitive Enterprise Institute, a Washington, D.C., public policy group.
The White House said it would oppose any efforts to hinder the bureau.
“The president fought to put into law the strongest consumer protections in history, and he will continue to fight any effort from our opponents to weaken the CFPB or water down its ability to protect middle-class families,” White House spokeswoman Amy Brundage said.
The suit says Congress violated the Constitution in granting the consumer bureau broad powers over any financial products or services it deems “unfair, deceptive or abusive,” a term not defined in the law.
In addition, the suit alleges that Obama’s January recess appointment of Cordray as director was unconstitutional because the Senate was not actually in a recess.
The suit seeks to overturn the creation of the consumer bureau and the financial oversight panel, as well as to prevent Cordray from using any of the powers of the director’s job.