Completing its first year, U.S. Consumer Financial Bureau sued by small Texas bank
A little Texas bank is trying to slay a giant.
The State National Bank of Big Spring in Texas is suing the year-old U.S. Consumer Financial Protection Bureau, trying to force the regulatory agency to define its limits. Doing so would bring stability to the banking industry, a lawyer involved says.
Critics say the USCFPB has an open-ended mandate that is confusing to America's large and small financial institutions.
“There is a lot of uncertainty today with respect the CFPB can do and how it would do it,” Joseph Barloon, a Washington lawyer handling the suit, tells Thomson Reuters. “This lawsuit, even if not successful, may help clarify some of those issues.”
The actual lawsuit, filed in June, questions the recess appointment by President Obama of the agency's first director, former Ohio Attorney General Richard Cordray.
In addition to challenging Cordray's appointment, the lawsuit claims the new bureau is unconstitutional because the usual limits on government agencies are not part of this new bureau. The bureau was set up to be more independent of Congress so it could do its job. The bureau is the first regulatory agency in the nation created entirely to protect consumers.
Lawyer Joseph Barloon, who filed the suit, regularly represents financial institutions before the Department of Justice, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Federal Trade Commission and other government agencies, according to his biography.
The filing of the lawsuit by a smaller bank seems to be a strategic move since most of the ire about the new climate of banking regulations in Washington seems directed at the large national banks. But smaller local banks say they are hurting, too, under the weight of the new regulatory requirements.
The lawsuit asks the court to invalidate certain portions of the new law that created the bureau, the 2010 Dodd-Frank financial overhaul act.
A spokeswoman for the consumer agency told the Wall Street Journal that the lawsuit "appears to dredge up old arguments that have already been discredited."
But C. Boyden Gray, a former aide to President George H.W. Bush, told the WSJ that, "as a whole, Dodd-Frank aggregates the power of all three branches of government in one unelected, unsupervised and unaccountable bureaucrat."
# # #
The above was compiled by Star-Telegram Watchdog columnist Dave Lieber. Read his column Fridays and Sundays in the Star-Telegram and on Star-Telegram.com.