WASHINGTON—A federal appeals court on Friday revived a broad
lawsuit challenging the constitutionality of the Consumer Financial
Protection Bureau.
The U.S. Court of Appeals for the District of Columbia Circuit
ruled a Texas bank had legal standing to proceed with a lawsuit
arguing the structure of the CFPB is unconstitutional.
The State National Bank of Big Spring is challenging the
formation and operation of the bureau. Its arguments include a
claim that independent government agencies must be headed by
multiple members, rather than by a single director, as is the case
at the CFPB.
A three-judge panel reversed parts of a trial judge's ruling
that threw out the lawsuit. The appeals court said the bank had
standing to proceed with its constitutional challenge because it is
subject to regulation by the bureau. The appeals court said it was
permissible for the bank to challenge the legality of the CFPB in a
pre-enforcement lawsuit.
The court didn't consider the merits of the bank's
constitutional claims. Instead, it said a trial court should
consider them first.
Friday's decision wasn't a total win for the challengers. The
appeals court ruled the bank didn't have legal standing to
challenge the constitutionality of the Financial Stability
Oversight Council, an entity created by the Dodd-Frank
financial-overhaul law that monitors the stability of the U.S.
financial system.
The appeals court also ruled a group of states didn't have legal
standing to challenge Dodd-Frank's grant of new government
authority to liquidate failing financial companies that pose a risk
to U.S. financial stability.
A CFPB spokesman said the agency was reviewing the decision.
Write to Brent Kendall at brent.kendall@wsj.com
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