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A federal district court has ordered that the CFPB must keep requesting money from the Federal Reserve under Dodd‑Frank’s existing funding mechanism, and the Trump administration cannot engineer a funding lapse by refusing to ask for transfers.
A federal judge has ruled that the Consumer Financial Protection Bureau (CFPB) must continue getting its funding from the Federal Reserve, dealing a setback to Trump administration efforts to effectively shut down the agency.
The ruling Friday by U.S. District Judge Edward Davila in San Jose blocks acting CFPB Director Russell Vought from using a new legal interpretation that would have cut off the agency’s funding stream.
Litigation centers on dispute over language in the 2010 Dodd-Frank Act — the law that created the CFPB after the 2008 financial crisis.
Unlike most government agencies, the CFPB doesn’t get its money from Congress through annual appropriations. Instead, it’s funded directly from the Federal Reserve, which raises money through bank fees and other activities.
Current law states the Fed shall transfer money to the CFPB from the “combined earnings” of the Federal Reserve System.
Vought, who was named acting director in February 2025, asked the Office of Legal Counsel for an opinion on what “combined earnings” means. In November, that office concluded it means profits — meaning if the Fed isn’t profitable, the CFPB can’t get money from it.
Based on that opinion, Vought decided not to ask the Fed for money. He instead asked Congress directly for funding, a process that would have required lawmakers to pass a new spending bill.
Three nonprofit groups that rely on CFPB data — Rise Economy, the Woodstock Institute and the National Community Reinvestment Coalition — sued, arguing Vought’s interpretation was wrong and would effectively starve the agency.
Judge Davila agreed.
He found that Vought’s interpretation “frustrates Congress’s intent to insulate the Bureau’s funding stream from this transparent display of partisanship.”
The judge noted that Vought said publicly this past October that he was working to “close down the agency” and would be successful within months.
In his ruling, Davila wrote that Vought’s plan to shut down the CFPB using “this clearly erroneous interpretation” goes against what Congress intended when it created the agency.
The court declared that Vought’s reliance on the legal opinion was “arbitrary, capricious and in violation of law,” and ordered the CFPB to keep requesting money from the Federal Reserve as the law requires.
The CFPB was created to oversee financial products like mortgages, credit cards and payday loans. It handles consumer complaints and collects data on lending practices that groups use to track whether banks are properly serving their communities.
Without that funding, plaintiffs argued, they would lose access to information they need to do their work.
The judge found that argument convincing, saying the groups had shown they would suffer “informational harm” if the CFPB lost funding.
What the ruling says
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Judge Amy Berman Jackson (D.D.C.) held on December 30, 2025, that the CFPB is required by statute to seek the funds “reasonably necessary” to carry out its duties from the Federal Reserve Board.
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The court rejected DOJ’s Office of Legal Counsel theory that the Fed’s recent operating losses meant there were no “combined earnings” available and thus no lawful way to fund the Bureau.
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The judge found that refusing to request funds would effectively dismantle an agency Congress created, something the executive cannot do unilaterally.
Why this came up
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Acting Director Russell Vought had announced mass layoffs and said he would not seek further quarterly transfers from the Fed, arguing that the Antideficiency Act and the “combined earnings” language barred new requests while the Fed was in the red.
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Advocacy groups (including Rise Economy, NCRC, and Woodstock Institute) sued, arguing that the administration was using a contrived funding “lapse” to shut down or paralyze the CFPB in violation of prior court orders.
Practical impact right now
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The CFPB has since made at least one new request: on January 9, 2026, Vought asked the Fed for about 145 million dollars to fund the Bureau for the second quarter of FY 2026, explicitly characterizing the request as legally required.
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A subsequent March 12–13, 2026 ruling again confirmed that the Bureau must continue requesting needed funds and that the administration’s earlier refusal was unlawful.
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The Supreme Court’s 2024 decision upholding the CFPB’s funding structure under the Appropriations Clause remains intact; these new cases are about compliance with that structure, not its constitutionality.
What to watch going forward
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Continuing litigation over the meaning of “combined earnings” and the interaction with the Antideficiency Act, including potential appeals from Judge Jackson’s orders.
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Whether Congress attempts to legislate changes to the CFPB’s funding cap or shift the Bureau onto the regular appropriations process (the “One Big Beautiful Bill” already lowered the statutory cap to 6.5% of the Fed’s 2009 expenses).
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Operationally, the Bureau is expected to remain funded and functioning while these disputes proceed, rather than winding down through a manufactured funding shortfall.
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