WASHINGTON, D.C. – The U.S. Court of Appeals for the Second Circuit ruled yesterday that the Consumer Financial Protection Bureau (CFPB) funding structure is constitutional. This decision comes as the U.S. Supreme Court plans to hear a separate lawsuit challenging the constitutionality of the CFPB funding structure in the coming months.

“The Second Circuit rightly reaffirmed that CFPB funding is constitutional – as is clear from judicial precedent, our country’s history, and the text of our Constitution,” said Mitria Spotser, vice president and federal policy director at the Center for Responsible Lending (CRL). “CFPB funding is well-established, commonplace, and legally indistinguishable from that of many government agencies including the Federal Reserve Board, other bank regulators, and Social Security. A ruling against the CFPB would not only be legally unsound, but it would invite legal challenges to funding for these critical agencies and programs.”

Yesterday’s Second Circuit decision was a three-judge panel’s unanimous ruling, authored by an appointee of President Trump and joined by appointees of President Bush, Sr. and President Carter. The Second Circuit, the D.C. Circuit, and at least six federal district courts have affirmed the constitutionality of the CFPB funding structure.

Last month, the Supreme Court announced it will hear Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited, a lawsuit brought by a trade association for payday lenders. The case comes from an appeal of a Fifth Circuit decision, which had illogically held that CFPB funding is unconstitutional, in part, because it derives from outside an annual congressional appropriations process. Going against judicial restraint, the Fifth Circuit also concluded that all CFPB actions are unconstitutional and the CFPB’s 2017 Payday Rule, which was being challenged, must therefore be vacated.

Throughout U.S. history and across our government, Congress has authorized funding streams for government agencies separate from an annual congressional appropriations process. The Constitution requires that funding for government activities be authorized by a law passed by Congress, but the Constitution does not prescribe a method that the Fifth Circuit inaccurately portrayed as mandatory. The CFPB’s funding was authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.


Press Contact: matthew.kravitz@responsiblelending.org