Leading Lawsuit Challenging the Dodd-Frank Act Dismissed
The leading ongoing case challenging the Dodd-Frank Act was dismissed by a federal judge on August 1, 2013. The case included a constitutional challenge to the “unbounded powers” conferred to the Consumer Financial Protection Bureau by the Dodd-Frank Act and was originally brought by a Texas community bank, State National Bank of Big Spring, and two conservative political groups. Eleven states, through their attorneys general, later joined as plaintiffs. The court held that the bank, as well as the eleven states and two conservative groups, did not have legal standing to challenge the Act.
U.S. District Judge Ellen Segal Huvelle stated in her order that the case was “not ripe for review” because the bank and other parties could not prove financial injury resulting from the Dodd-Frank Act. Judge Huvelle clarified that the bank could not oppose the CFPB’s existence simply because of what it might do in the future: “The bank’s claims remain abstract until there is some regulation that actually causes harm or will plausibly harm in the near future.” While the bank had argued that the requirements of the new CFPB regulations necessitated it expending more money on compliance programs, the judge said that higher compliance spending would have likely been needed in any event following the financial crisis.
The Impact
The plaintiffs have expressed their intent to appeal the ruling, and further cases will continue to be brought contesting the CFPB and its jurisdiction. Even as recently as late last month, a new case was filed against the CFPB by
two entities involved in the debt relief industry claiming that the CFPB’s structure violated the Constitution’s separation of powers doctrine. However, the bottom line is that with the
confirmation of Director Richard Cordray, and now the dismissal of what has been considered the leading lawsuit challenging the Dodd-Frank Act, the authority of the CFPB has been further strengthened and solidified. No company
should feel comfortable sitting on the sidelines waiting for a successful challenge to the CFPB and its authority; rather, all companies should be working diligently towards ensuring that their practices and compliance programs meet
the requirements and expectations of the CFPB.
About Troutman Sanders Troutman Sanders is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions. Troutman Sanders’ CFPB Team monitors the development and activities of the CFPB on its CFPB Report blog and also advises clients on CFPB and Dodd-Frank issues. Additionally, Troutman Sanders’ Financial Services Litigation practice group has successfully litigated a wide variety of individual and class action litigation, as well as other federal and state consumer protection laws now under the umbrella of the CFPB.
© TROUTMAN SANDERS LLP. ADVERTISING MATERIAL. These materials are to inform you of developments that may affect your business and are not to be considered legal advice, nor do they create a lawyer-client relationship. Information on previous case results does not guarantee a similar future result.