Second Circuit Court of Appeals Rules CFPB Funding Structure Constitutional

By John Zasada, JD, CAMS – Shareholder, Financial Institutions Group

The Second Circuit Court of Appeals has ruled the Consumer Financial Protection Bureau (CFPB)’s funding structure as “not unconstitutional”.

This is contrary to the conclusion reached by the Fifth Circuit Court of Appeals on Oct. 19, 2022, in the case of Community Financial Services Association of America, Limited v. the CFPB. The Fifth Circuit held “Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers.” While the Second Circuit determined “…the CFPB Director was validly appointed, that the CFPB’s funding structure is not constitutionally infirm under either the Appropriations Clause or the nondelegation doctrine…”

The Supreme Court has already agreed to review the Fifth Circuit’s decision, and now stands to reason they will also rule on the Second Circuit’s decision. It appears the Supreme Court will hear the case in 2024.

Learn more about what this means for your financial institution by contacting Doeren Mayhew’s Financial Institutions Group today.