Judicial Ruling Reinforces CFPB’s Statutory Funding Structure

A federal judge in California has blocked the administration’s attempt to halt CFPB funding, ruling that the bureau’s budget requests to the Federal Reserve must proceed.

A federal judge in the Northern District of California has ruled that the Consumer Financial Protection Bureau must continue to seek funding from the Federal Reserve.

The decision comes after a challenge regarding the agency’s budget source, where the government argued — based on a Department of Justice (DOJ) opinion — that the Federal Reserve’s lack of profitability should halt the flow of funds to the CFPB.

However, U.S. District Judge Edward Davila dismissed this reasoning, characterizing the move to defund the bureau as a “transparent attempt” to shut down its operations.

The ruling in Rise Economy v. Vought delivered a rejection of the legal theory used by Acting Director Russell Vought to halt the bureau’s budget requests, according to a report from The Hill. The decision ensures the CFPB remains operational through its independent funding stream, at least for the immediate future.

Key takeaways from the ruling include:

• Definitional Clarification: The judge found that DOJ lawyers misapplied the legal definition of “combined earnings” regarding the central bank.
• Authority Limits: The court ruled that the CFPB director lacks the legal standing to determine the Federal Reserve’s profitability. The ruling emphasized that a director from an outside agency cannot dictate the accounting definitions of the central bank to bypass statutory funding obligations.
• Imminent Action: Following the ruling, the DOJ indicated that the administration intends to move forward with additional funding requests before the March 31 deadline.

This is the second major court victory for proponents of the CFPB’s current structure this year, following a similar ruling in NTEU v. Vought in the U.S. District Court in the District of Columbia, ACA International previously reported.

With funding secured, the CFPB’s core functions — including supervision, enforcement, and rulemaking — are expected to continue, albeit potentially with a smaller footprint as parallel litigation regarding staffing and leadership remains ongoing.

The D.C. Circuit Court of Appeals heard oral arguments in National Treasury Employees Union (NTEU) v. Russell Vought (Case No. 25-1591) Feb. 24 concerning a challenge to the administration’s efforts to downsize or shut down the CFPB through a reduction-in-force (RIF) and other administrative directives, ACA previously reported.