The D.C. Circuit Court of Appeals reversed a district court decision dismissing a bank’s challenge to the constitutionality of the CFPB based on lack of standing. The district court had previously concluded that compliance costs were not an actual injury and, therefore, that the bank lacked standing and that the claims were not ripe.
State National Bank of Big Spring, a small Texas bank, joined by a number of states, filed suit challenging the constitutionality of the formation of the CFPB, the appointment of CFPB Director Richard Cordray, and the operation and creation of the Financial Stability Oversight Council (FSOC). State National offers checking accounts, savings accounts, certificates of deposit, and individual retirement accounts, all consumer financial products subject to CFPB regulation. The bank asserted that the Dodd-Frank Act’s creation of the CFPB violated constitutional separation of powers because Congress "delegated effectively unbounded power to the CFPB, and coupled that power with provisions insulating the CFPB against meaningful checks by the Legislative, Executive, and Judicial Branches." The bank also alleged that as an independent agency, the CFPB could not be headed by a single person but rather, must be headed by multiple members to be constitutional. The states of Michigan, Oklahoma, South Carolina, Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas, and West Virginia later joined the suit as plaintiffs to challenge Dodd-Frank’s grant of orderly liquidation authority to the Treasury, the Federal Reserve, and the FDIC.
State National alleged its injuries caused by the formation and operation of the CFPB included compliance costs, loss of profitability, loss of revenue in mortgage lending, and a discontinuation of mortgage lending as a result of revenue loss. The district court found these alleged injuries insufficient to establish standing to challenge the constitutionality of the CFPB, and held it was not enough to simply say that State National was "directly subject to the authority of the agency." The court also found that the claims were not ripe because the specific rules challenged were not applicable to the bank.
The D.C. Circuit found that the bank merely needed to show that it was regulated by the CFPB to have standing to challenge its constitutionality—which it found had been established. The court also noted that State National did not challenge the regulations of the CFPB, but rather regulation by the CFPB, thereby demonstrating ripeness. However, the court also found that State National did not have standing to challenge the FSOC, because State National was a small bank, not subject to FSOC regulations as a "too big to fail entity," thereby rejecting the bank’s "competitor standing" theory, i.e. that it had standing because it competed with entities subject to FSOC regulation. The case was remanded to proceed on the merits.