Challenging the CFPB’s authority has so far been a fruitless pursuit. Legislation to stem the agency’s power hasn’t moved in Congress and court challenges haven’t really gone anywhere. A new ruling by a U.S. Court of Appeals, however, may create momentum for judicial action to rein in the CFPB’s regulatory actions.

Three years ago, a Texas bank sued in federal court to challenge the constitutionality of the CFPB’s authority to regulate it. The bank’s three main arguments challenging the CFPB’s constitutional authority are:

  1. The bureau is headed by a single director rather than multiple members, and argues Dodd-Frank (the legislation that created the CFPB) violates the “non-delegation doctrine”, a rule that limits Congress’s ability to give away its legislative powers to executive agencies;
  2. Obama’s 2012 recess appointment of CFPB Director Richard Cordray was unlawful because it wasn’t really during an actual congressional recess;
  3. The Financial Stability Oversight Council (also created by Dodd-Frank) and its authority to issue rules governing financial companies it deems “too big to fail” is unconstitutional.

When the case was first heard in a D.C. district court, the court found that the Texas bank didn’t have standing to bring these claims. At the end of July, however, a U.S. Court of Appeals reversed the district court’s decision, ruling that the bank does have standing to sue on the first two points. Since the bank itself was not considered “too big to fail,” the court ruled it could not challenge the authority of the Financial Stability Oversight Council.

Of course, this ruling doesn’t mean the bank will win its challenge to the CFPB’s authority—the court didn’t consider the merits of the bank’s case. But it does allow the case to move forward, bringing more attention to the core constitutional questions surrounding the CFPB’s operations.