Judge Orders CFPB to Continue Requesting Federal Reserve Funding
A federal judge in California ruled that the Consumer Financial Protection Bureau (CFPB) unlawfully refused to request funding from the Federal Reserve, delivering another legal setback to Trump administration efforts to weaken the agency.
U.S. District Judge Edward J. Davila found that Acting Director Russell Vought’s decision to halt funding requests, based on a reinterpretation of the Federal Reserve’s “combined earnings,” was arbitrary, capricious and contrary to law. The ruling orders the CFPB to resume requesting funds necessary to carry out its statutory responsibilities.
At the center of the dispute is how to interpret “combined earnings,” the statutory mechanism through which the CFPB is funded outside the congressional appropriations process. Vought had argued that because the Fed’s interest expenses exceeded its revenues, no funds were legally available. Judge Davila rejected that view, concluding that the statute refers broadly to the Fed’s revenues and that the CFPB director lacks authority to redefine the term.
The judge warned that adopting the administration’s interpretation would undermine Congress’s intent to insulate the CFPB from political pressure by effectively forcing it into the appropriations process. He also noted that such a framework could lead to intermittent defunding tied to fluctuations in the Fed’s balance sheet, potentially depriving the agency of resources during periods of economic stress when consumer protections are most needed.
The ruling aligns with similar decisions from other federal courts, including one by Judge Amy Berman Jackson in Washington, D.C., reinforcing a growing judicial consensus that the administration cannot unilaterally cut off the bureau’s funding stream.
The case is part of a broader legal battle over the CFPB’s future, as the Trump administration has pursued layoffs, halted enforcement actions, and explored avenues to shutter the agency altogether. While officials have recently indicated they may request additional funds in the near term, the court signaled concern about whether the agency will continue doing so consistently.
