Consumer Advocates Applaud as Federal Court 'Yet Again' Finds CFPB's Funding Constitutional

U.S. Sen. Elizabeth Warren, who established the Consumer Financial Protection Bureau in 2010, was among the consumer advocates celebrating on Thursday as a federal court in New York City ruled that the bureau's funding structure is constitutional—rebuking years of right-wing and corporate attacks on the agency.

The Massachusetts Democrat expressed hope that the U.S. Supreme Court, which is expected to hear arguments in a separate but related case later this year, "follows more than a century of law and historical precedent" and also rules in favor of the CFPB, which has regulated debt collectors, payday lenders, credit card companies, and other financial businesses for more than a decade.

"Yet again, the constitutionality of the CFPB has been upheld, as it has been time and time before," said Warren.

The 2nd U.S. Circuit Court of Appeals ruled in favor of the bureau Thursday in a case stemming from a debt collector's attempt to avoid a subpoena from the CFPB in 2017.

A lower court ruled in the case in August 2020 that the bureau's funding structure is constitutional, but the 5th U.S. Circuit Court of Appeals in New Orleans said last year in the case set to be heard by the Supreme Court that the funding violates the Constitution's appropriations clause and the separation of executive and legislative powers.

The CFPB is funded by the Federal Reserve rather than through appropriations voted on annually by lawmakers.

Writing for the three-judge 2nd Circuit panel that voted unanimously in favor of the bureau, Judge Richard Sullivan noted that the justice system "has consistently interpreted the appropriations clause to mean simply that 'the payment of money from the Treasury must be authorized by a statute,'"—which doesn't apply to the CFPB since it receives no funding from the U.S. Treasury Department.

An upcoming ruling by the Supreme Court that supports the 2nd Circuit's finding would "mark a major win for everyday consumers impacted by abusive fees, predatory lenders, and corporate greed," said government watchdog Accountable.US.

"The CFPB is a vital voice for consumers and protects Americans from unfair and abusive practices," said Rep. Nydia Velázquez (D-N.Y.). "We can't allow these protections to be weakened."