If you are part of a company that provides consumer financial products and services, you probably know about the Consumer Financial Protection Bureau (CFPB). It was established by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which established the Bureau and authorizes it to supervise certain consumer financial services companies and large depository institutions and their affiliates in order to protect consumers.

Dodd-Frank effectively transferred the rulemaking responsibility for many consumer financial protection regulations from federal agencies to the new bureau. So the CFPB is now tasked with ensuring all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive.

Watchdog for Consumers

The CFPB is also responsible for implementing federal consumer financial law, including Title X of Dodd-Frank, and ensuring companies are in compliance with it. The CFPB is the watchdog for ensuring consumers are not subject to unfair, deceptive, or abusive acts and practices in connection with consumer financial products and services.

You wouldn’t be wrong to think that this all sounds like a great idea. Protecting consumers from the big, bad banks certainly can’t be a bad thing, especially in light of the financial collapse of several years ago and the fallout that ensued.

Power without Process

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But some point out that a body with the huge mandate granted to the CFPB might have too much power, as was argued in a complaint filed against the agency in June. The constitutional challenge was filed by Morgan Drexen, Inc. and attorney Kimberly Pisinski, who said that they had been the target of “a burdensome CFPB investigation and an imminent litigation threat, where CFPB has demanded the production of documents –including privileged attorney-client communications and confidential personal material held by Morgan Drexen for lawyers like Pisinski.”

The plaintiffs challenge the structure of CFPB as “violating the Constitution's separation of powers given: (1) the extraordinary scope of power delegated to CFPB; and (2) the lack of political oversight and necessary checks and balances.”

Checks and Balances

Despite granting CFPB significant power, the plaintiffs argue, Congress did not put into place the typical oversight, “especially the President's power to remove the CFPB Director at-will, a built-in multimember commission (which has been the hallmark of independent agencies for more than 125 years), and political accountability through the appropriations process.”

It will be interesting to see how this case plays out over the next few months. Checks and balances are always a good thing, especially when it comes to those who police the checks and balances of others.