Ruling Prevents Defunding Of CFPB

A recent federal court ruling blocks the Trump administration from cutting off money to the Consumer Financial Protection Bureau (CFPB), ensuring the agency keeps operating and paying its employees into 2026.​

What the ruling says

• U.S. District Judge Amy Berman ordered that the White House may not allow any interruption in CFPB funding just as the bureau was projected to run out of money in early 2026.​

• The judge held that the CFPB is still entitled to receive transfers from the Federal Reserve, even though the Fed is currently operating at a paper loss.​

The administration’s defunding attempt

• The Trump administration, through budget director and acting CFPB head Russell Vought, argued that because the Federal Reserve has no “combined earnings,” the CFPB cannot lawfully draw funds.​

• This theory would have effectively shut down the bureau and enabled mass layoffs, despite an existing injunction obtained by the National Treasury Employees Union (NTEU) against such cuts.​

Why this matters for the CFPB

• The ruling preserves the CFPB’s long‑standing funding model, in which the agency is financed by the Federal Reserve rather than annual congressional appropriations.​

• It also undercuts a key strategy by the administration to neutralize the agency after largely sidelining its enforcement work since Donald Trump returned to the presidency.​

Connection to earlier Supreme Court decision

• In May 2024, the U.S. Supreme Court upheld the CFPB’s funding structure as constitutional, confirming that drawing money from the Federal Reserve complies with the Appropriations Clause.​

• That Supreme Court decision removed a broad constitutional threat to the CFPB, while the new district court ruling deals with a narrower, technical attempt to starve the agency of funds using the “combined earnings” argument.​

What happens next

• The judge’s order allows CFPB funding to continue while litigation over the NTEU’s lawsuit and related issues proceeds, with a trial currently set for February 2026.​

• State attorneys general and Democrats in Congress have praised the decision, framing it as essential to maintaining federal consumer protection enforcement against banks, lenders, and other financial firms.​