Thecomplaint states that the Dodd-Frank Act effectively delegates unlimited power
to the CFPB to regulate practices that the Bureau deems to be unfair,
deceptive, or abusive, thereby granting the Bureau vast authority over consumer
financial product and service firms, such as the plaintiff bank. The Act does not define unfair or deceptive
acts or practices, leaving those terms to the CFPB to interpret and enforce
either through ad hoc litigation or through regulation. The Act does not
provide meaningful limits on what the CFPB can deem an abusive act or practice.
While the Act allows the CFPB to define and enforce these standards through
rulemaking, noted the complaint, Director Richard Cordray has already announced
that the Bureau will define and enforce them primarily through ad hoc ex post
facto enforcement.
The
bank contends that Dodd-Frank eliminates the constitutional checks and balances
that would ordinarily limit the CFPB’s exercise of these broad and undefined
powers, thereby violating the separation of powers doctrine. For example, Congress
has no power of the purse over the CFPB, which the Act allows to essentially
fund itself by unilaterally claiming funds from the Federal Reserve Board. The
Director, who cannot be removed at the pleasure of the President, determines the
amount of funding the Bureau receives from the central bank and then the Fed must
transfer those funds to the Bureau. In addition to allowing the CFPB to fund
itself, alleged the bank, the Act prohibits Congress from even attempting to
review the Bureau’s budget.
Judicial
oversight is limited by Dodd-Frank provisions requiring the courts to grant the
same deference to the CFPB’s interpretation of federal consumer financial laws that
they would if the Bureau were the only agency authorized to apply and interpret
or administer the provisions of federal consumer financial law. The CFPB’s
regulatory authority is further insulated from accountability to the very
agency in which it is housed by provisions stating that no regulation adopted by
the CFPB can be subject to review of or approval of the Fed.
Similarly,
the FSOC is given sweeping power and unbridled discretion to pick which
non-bank financial firms are systemically important, thereby subjecting the
firm to enhanced federal regulation. The FSOC determination is not subject to
meaningful judicial review. While a firm designated by FSOC as systemically
important may appeal to a federal district court, noted the complaint, the
appeal is limited to the question of whether that determination was arbitrary
and capricious. Section 113 of Dodd-Frank forbids the courts to review whether
FSOC’s action was in accordance with law.
The
bank argues that Title I’s open-ended grant of power and discretion to FSOC,
combined with the elimination of judicial review of FSOC’s judgments, and the
inclusion of members neither appointed by the President nor confirmed by the
Senate, gives FSOC the unfettered discretion to determine which non-bank
financial firms are systemically important, violates the separation of powers
and is unconstitutional.