Bloomberg Law
March 23, 2023, 2:05 PMUpdated: March 23, 2023, 7:06 PM

CFPB Independent Funding Constitutional, Second Circuit Rules (1)

Evan Weinberger
Evan Weinberger

The Consumer Financial Protection Bureau’s independent funding through the Federal Reserve is constitutional, the Second Circuit ruled ahead of a US Supreme Court review on the issue.

The unanimous Thursday ruling from a three-judge panel of the US Court of Appeals for the Second Circuit stems from a New York debt collection law firm’s attempt to escape the CFPB’s 2017 civil subpoena. A lower court ruled in the CFPB’s favor in August 2020.

The debt collector, the Law Offices of Crystal Moroney PC, argued in part that the CFPB’s funding—derived from the Fed and outside of the Congressional appropriations process—violates the Constitution’s Appropriations Clause and nondelegation doctrine. The Second Circuit panel rejected that argument.

The Supreme Court is set to hear in its upcoming October term the CFPB’s appeal of a Fifth Circuit ruling that the agency’s funding is unconstitutional and should be subject to Congressional appropriations.

But the Second Circuit said that it “cannot find any support” in Supreme Court precedent for the Fifth Circuit’s ruling. The Second Circuit’s ruling was written by Judge Richard L. Sullivan, a Trump appointee.

The CFPB’s document demands caused Moroney to shutter her law firm and “illustrates how a federal agency without funding constraints can quickly get out of control,” Moroney’s attorney Richard Samp said in an email.

“The Supreme Court has agreed to review the Fifth Circuit’s decision; we plan to bring our case to the Supreme Court as well,” Samp, senior legal counsel at the New Civil Liberties Alliance, said.

The CFPB declined to comment.

The CFPB first sought to serve a civil investigative demand against Moroney’s in 2017.

Moroney’s firm originally argued that the CFPB’s subpoena was invalid because the leadership structure at the time the CID was issued was unconstitutional.

The Supreme Court ruled in June 2020 in Seila Law LLP v. CFPB that the single-director leadership structure— where the president could only fire the CFPB director for “inefficiency, neglect of duty, or malfeasance in office”—violated the Constitution’s separation of powers doctrine. The high court fixed the problem by making the director an at-will employee of the president.

The Seila Law decision didn’t address the CFPB’s funding. Congress gave the CFPB the power to request up to 12% of the Fed’s operating expenses to fund its operations. The agency must to go to Congress if it needs more money.

The Fifth Circuit ruled in Community Financial Services Association of America v. CFPB in October that the funding mechanism Congress set up violated the Appropriations clause. Funding through the Fed provided the CFPB “double insulation” from Congressional oversight, the appeals court said.

Moroney attempted to get the CFPB’s CID tossed by arguing that the CFPB’s funding was unconstitutional, and that Seila Law didn’t address the issue.

Judge Kenneth M. Karas of the US District Court for the Southern District of New York ruled in August 2020 that Seila Law was the last word on the CFPB’s constitutionality. There was “really no authority to support this self-funding theory,” he said.

The Second Circuit on Thursday agreed.

“To the contrary, the Court has consistently interpreted the Appropriations Clause to mean simply that ‘the payment of money from the Treasury must be authorized by a statute,’” the Second Circuit said.

The CFPB doesn’t get any money from Treasury.

Judge Richard J. Sullivan wrote the opinion with Judges Amalya L. Kearse and John M. Walker Jr. signing on.

The case is Consumer Financial Protection Bureau v. Law Offices of Crystal Moroney PC, 2d Cir., No. 20-3471, Opinion 3/23/23.

(Updates with information from the opinion and comment from Moroney's attorney in 5-7 paragraphs)

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editors responsible for this story: Maria Chutchian at; Roger Yu at

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