Bill Schuette against the Frank Dodd Act

Michigan Attorney General Bill Schuette has joined the Attorneys General of South Carolina and Oklahoma, along with private party plaintiff’s Competitive Enterprise Institute, State National Bank of Big Spring, and the 60-Plus Association in challenging the constitutionality of certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), which was signed into law on July 21, 2010. The suit specifically alleges that:

  • Title X’s delegation of power to the Consumer Financial Protection Bureau (“CFPB”) to prevent “unfair, deceptive, or abusive practices in connection with … offering of a consumer financial product or service” violates the Constitution’s separation of powers;
  • The President’s “recess appointment” of Richard Cordray as the CFPB Director violates the Constitution’s Appointments Clause because the Senate was not technically recessed when Cordray was appointed;
  • Title I’s grant of power to the Financial Stability Oversight Council (“FSOC”) violates separation of powers because it grants “effectively unlimited power” to the FSOC without the availability of meaningful judicial review by entities determined by the FSOC to be “systemically important” (i.e. “too big to fail”) of by their competitors; and
  • Title II’s grant of “Orderly Liquidation Authority” to the Treasury Secretary violates separation of powers, the Constitution’s Due Process Clause, and is unconstitutional because it constitutes a non-uniform law of bankruptcy.

According to the complaint, the State National Bank of Big Spring is a Texas Community Bank which opened in 1909 and has three locations. The plaintiffs allege that these provisions of the Act have injured the bank by imposing burdensome requirements and has created an environment of regulatory uncertainty, which has lead the bank to discontinue offering certain loans.

A copy of the plaintiffs’ First Amended Complaint for Declaratory and Injunctive Relief can be found here:

The Gallagher Law Firm is committed to providing quality and cost effective service to Michigan’s community bankers. For any of your banking law needs please contact Pat Gallagher.