The federal agency created to help shield consumers against lending practices that could be considered misleading or troublesome now faces a lawsuit from both a small bank and business advocacy groups over the breadth of its power.

The federal Consumer Financial Protection Bureau was recently hit with a lawsuit from three organizations as a result of its broad power over the entire lending industry, according to a report from Reuters. The suit was filed by the Big Springs, Texas-based State National Bank, the Competitive Enterprise Institute and the 60 Plus Association, and specifically asks that the court rule the parts of the Dodd-Frank Wall Street Reform and Financial Protection Act that created the CFPB be invalidated.

The suit claims that parts of the law related to the CFPB's creation are unconstitutional because Congress doesn't control the agency's budget, and it lacks considerable oversight from both the executive and judicial branches. Lawyer C. Boyden Gray, a former White House counsel under President George H.W. Bush, notes that no other law combines the powers of one agency in that way.

"No other federal agency or commission operates in such a way that one person can essentially determine who gets a home loan, who can get a credit card and who can get a loan for college," said State National Bank chief executive officer Jim Purcell. "Dodd-Frank effectively gives unlimited regulatory power to this so-called Consumer Financial Protection Board, also known as CFPB, with a director who is not accountable to Congress, the President or the Courts. That is simply unconstitutional."

Government will fight suit
For their part, both the White House and the CFPB itself claim the suit is baseless, and are prepared to fight it, the report said. In particular, they noted that the CFPB only has the power to regulate banks with assets exceeding $10 billion, and State National Bank has just $300 million in assets, meaning that the CFPB has little or no control over it. For its part, though, the bank argues that the rules the CFPB is setting with relation to mortgage underwriting and other consumer lending affects it indirectly.

The CFPB is in charge of helping consumers deal with their finances in a safer way, but Americans should also take the time to make sure they regularly check their credit reports on their own.