In Consumer Financial Protection Bureau v. Law Offices of Crystal Moroney, 63 F.4th 174 (2d Cir. 2023), the U.S. Court of Appeals for the Second Circuit considered whether the Consumer Financial Protection Bureau (CFPB)’s funding structure was proper under both the appropriations clause and the nondelegation doctrine. In an unanimous opinion authored by Circuit Judge Richard Sullivan and joined by Circuit Judges Amalya Kearse and John Walker, the court determined the CFPB’s funding structure was not constitutionally deficient under either doctrine. In reaching this holding, the Second Circuit expressly declined to follow the Fifth Circuit’s recent opinion in Community Financial Services Association of America v. Consumer Financial Protection Bureau, which held that the CFPB’s funding apparatus could not be reconciled with the appropriations clause. The Second Circuit’s decision thus creates a circuit split as to the constitutionality of the CFPB’s funding structure.

The Consumer Financial Protection Bureau

In the wake of the 2008 global financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank), which made a number of reforms to regulation of the financial services industry. Title X of Dodd Frank created the CFPB in order to empower a single agency to regulate consumer financial products and services. Rather than by being funded through annual Congressional appropriations, the CFPB is funded through its enabling statue. See 12 U.S.C. Section 5497(a). Through this statute, the CFPB is authorized to draw funds from the combined earning of the Federal Reserve System up to a percentage cap of the Federal Reserve’s operating expenses. The CFPB can also seek further funding through the annual appropriations process.

The Fifth Circuit’s Decision in ‘Community Financial Services Association of America v. Consumer Financial Protection Bureau’

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