Court Rules Consumer Watchdog’s Funding is Constitutional

March 23, 2023

The Second Circuit Court of Appeals ruled Thursday that the funding structure for the Consumer Financial Protection Bureau (CFPB) through the Federal Reserve is constitutional.

The three-judge panel’s unanimous ruling came out of a case where a New York debt collection law firm is attempting to dodge a civil subpoena issued in 2017 by the CFPB. A lower court had ruled in favor of the CFPB in August 2020.

The Law Offices of Crystal Moroney PC had argued in part that CFPB’s funding through the Fed, rather than through the Congressional appropriations process, violated the Constitution’s Appropriations Clause and nondisclosure doctrine. 

The Second Circuit’s rejection of that argument on Thursday comes in anticipation of a Supreme Court decision on the fate of the CFPB that’s due next year. The Justices are set to hear arguments in the Court’s next term—which begins in October—in the CFPB’s appeal of a 2022 ruling in the Fifth Circuit Court that its funding does, in fact, violate the Constitution and that the agency should be subjected to Congressional appropriations. 

The Second Circuit said in its Thursday ruling that “cannot find any support” for the Fifth Circuit’s ruling on the CFPB’s funding in Supreme Court precedent.

In a 5-4 decision in June 2020, the Supreme Court struck down the CFPB’s single-director setup but allowed it to otherwise continue operating. 

Neither the CFPB nor Moroney law offices have commented on the Second Circuit Court’s ruling.

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