Second Circuit Rules CFPB Funding Mechanism Is Constitutional, Deepening Split With Fifth Circuit

On March 23, the U.S. Court of Appeals for the Second Circuit ruled that the CFPB's funding mechanism is constitutional.¹ The case, CFPB v. Law Offices of Crystal Moroney, is significant for two reasons. First, the Second Circuit expressly declined to follow the Fifth Circuit's recent ruling in CFPB v. Community Financial Services Association of America that the CFPB's funding mechanism violates the Appropriations Clause of Article I of the Constitution.² Second, the Second Circuit issued its ruling after the Supreme Court granted certiorari in Community Financial − weighing in on a controversial issue that the Supreme Court has already agreed to address.

Moroney concerned a challenge by a law firm to a civil investigative demand issued by the CFPB. The law firm argued, among other things, that the CID was invalid because the CFPB's funding mechanism is unconstitutional. Under the Consumer Financial Protection Act, the CFPB does not receive funds through