Federal appeals court finds US consumer protection agency’s funding is constitutional News
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Federal appeals court finds US consumer protection agency’s funding is constitutional

The US Court of Appeals for the Second Circuit Thursday upheld the funding of the Consumer Financial Protection Bureau (CFPB) as constitutional.

The court found the CFPB is funded by Title X of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The court’s finding rejected the argument of the plaintiff in the case, the Law Offices of Crystal Moroney P.C., which argued that the agency’s ability to recover documents relating to debt collection violated the Appropriations Clause of the US Constitution.

The Appropriations Clause states, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The intent of the clause was to limit the executive branch’s spending power. In the US, Congress, instead of the executive branch, controls government funding. Congress must pass appropriation statutes in order for the government to spend money.

Moroney also argued before the court that the funding structure violated the Appropriations Clause because the director of the agency controls money allocation from the Department of Treasury “without any meaningful guidance, limitation, or control by the Legislative Branch.”

The court again rejected the argument. They cited the specific statute, 12 U.S.C. § 5497, which limits the amount of funding the CFPB may obtain and subjects the agency to annual audits.

The court’s ruling directly conflicted with a 2022 ruling in the US Court of Appeals for the Fifth Circuit. In the conflicting case, the court found the funding statute insured “perpetual insulation from Congress’s appropriations power.” The result made the agency “no longer dependent,” and “no longer accountable.” The US Court of Appeals for the Second Circuit addressed the contradictory ruling by stating, “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.” Furthermore, the court stated that they would not reconsider the issue unless the US Supreme Court ordered them to do otherwise.

The US Supreme Court is set to hear arguments in the conflicting case from the US Court of Appeals for the Fifth Circuit this year.

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