New CFPB lawsuit raises nondelegation challenge

The New Civil Liberties Alliance (NCLA), a pro bono law firm with a focus on the administrative state, filed a lawsuit on December 19 in the U.S. District Court for the Southern District of New York challenging the constitutionality of the Consumer Financial Protection Bureau (CFPB) on the grounds that Congress unlawfully delegated appropriations power to the agency in violation of the nondelegation doctrine. Prior constitutional challenges to the CFPB, including a case currently pending before the United States Supreme Court, have claimed that the CFPB’s single director is unconstitutionally insulated from removal by the president.

The nondelegation doctrine is a legal principle holding that legislative bodies cannot delegate their legislative powers to executive agencies or private entities. In other words, lawmakers can’t allow non-lawmakers to make laws. The case, Law Offices of Crystal Moroney v. Bureau of Consumer Financial Protection, alleges that Congress violated the nondelegation doctrine by granting the CFPB the authority to draw funding directly from the Federal Reserve. This grant of authority, according to NCLA, allows the agency to unilaterally exercise appropriations power and evade oversight from congressional appropriations committees.

The lawsuit also reiterates the claim that the structure of the CFPB is unconstitutional because its single director (rather than multi-member commission) has protections that guard against direct removal by the president. This question is currently pending before the United States Supreme Court in Seila Law v. Consumer Financial Protection Bureau.

The case further alleges that the CFPB violated Crystal Moroney’s due process rights by issuing, withdrawing, and—after a federal court dismissed the case—reissuing civil investigative demands against Moroney’s law firm.

Click here to learn more about the nondelegation doctrine.
Click here to learn more about the appointment and removal power.

Additional reading:
Civil Liberties Alliance 
Consumer Financial Protection Bureau 
Seila Law v. Consumer Financial Protection Bureau 
United States District Court for the Southern District of New York