Second Circuit Holds CFPB’s Funding Structure Is Constitutional

Diana M. Eng, Louise Bowes Marencik, and Jonathan K. Moore ●

Entities regulated by the Consumer Financial Protection Bureau (“CFPB”), including banks, credit unions, payday lenders, mortgage servicers, debt collectors, and other financial services providers, should take note that the Second Circuit has held that the CFPB’s funding structure does not violate the Appropriations Clause of the Constitution. Further, CFPB-regulated entities should pay close attention to the Supreme Court of the United States’ forthcoming decision on the constitutionality of the CFPB’s funding structure. If the CFPB’s funding structure is held to be unconstitutional, the bureau’s future operations will be in jeopardy without action from Congress.

In Consumer Financial Protection Bureau v. Law Offices of Crystal Moroney, P.C., No. 20-3471 (2d Cir. March 23, 2023), the United States Court of Appeals for the Second Circuit (“Second Circuit”) held that the Consumer Financial Protection Bureau’s (“CFPB”) funding structure is constitutional. In doing so, the Second Circuit affirmed the decision of the United States District Court for the Southern District of New York (“District Court”) upholding the enforceability of an investigative demand served by the CFPB on a debt collection law firm.

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