Consumer Finance Litigation

In a recent opinion, the Second Circuit considered a second challenge to the funding structure of the CFPB, upholding it as constitutional.

On October 19, 2022, this issue was first considered by the Fifth Circuit in Community Financial Services Association of America, Ltd. v. Consumer Financial Protection Bureau, 51 F.4th 616 (2022). There, the court determined the payment structure established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376—which grants discretion to the director of the CFPB to draw funding for the Bureau from the Federal Reserve System up to a statutory cap—violated the Appropriations Clause of the U.S. Constitution.

Just yesterday, the Second Circuit published its opinion reaching the opposite conclusion in Consumer Financial Protection Bureau v. Law Offices of Crystal Moroney, P.C., --- F.4th ---, 2023 WL 2604254 (2d Cir. Mar. 23, 2023). The Second Circuit directly addressed the Fifth Circuit’s opinion, declining to follow its lead. Specifically, the Second Circuit stated that it could not find any support for the Fifth Circuit’s conclusion in either Supreme Court precedent, the text of the Constitution, or the history of the Appropriations Clause.

The U.S. Supreme Court has already agreed to hear this issue in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., No. 22-448. It will be interesting to see whether this most recent opinion, which creates a circuit split on the issue, affects the opinion of the Supreme Court. We will continue to monitor this line of cases and provide updates as they transpire.