Disagreeing with the 5th Circuit, the 2d Circuit holds that the CFPB’s funding structure is constitutional

In 2019, the CFPB issued a “civil investigative demand” to the Law Offices of Crystal Moroney, a law firm that principally provides legal advice and services to clients seeking to collect debt. In April 2020, the CFPB moved to enforce the 2019 CID. In August 2020, the district court granted the CFPB’s petition to enforce the CID. Moroney appealed.

On appeal, Moroney argued that the CID cannot be enforced because (1) the CID was void ab initio under Seila Law, as the CFPB Director was shielded from presidential oversight by an unconstitutional removal provision at the time the CID was issued; (2) the funding structure of the CFPB violates the Appropriations Clause of Article I of the Constitution; (3) Congress violated the nondelegation doctrine when it created the CFPB’s funding structure; and (4) the CID is an unduly burdensome administrative subpoena.

Today, the Second Circuit affirmed the district court’s decision. It held “that the CID was not void ab initio because 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, and that the CID served on Moroney is not an unduly burdensome administrative subpoena.”

On the appropriations clause issue, the court’s opinion directly disagrees with the Fifth Circuit’s decision in CFPB v. Consumer Financial Services Ass’n. The Supreme Court has granted certiorari in that case, and will hear argument in the case next fall.

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