In a decision that delivered a blistering rejection of the Trump Administration’s CFPB plans, a federal judge has ruled that the Bureau must continue to request funds from the Federal Reserve Board.

The administration’s plans amounted to a “transparent attempt to ‘close down the agency,’” Judge Edward J. Davila of the Northern District of California said, in a lawsuit filed by three groups challenging the Administration’s decision not to request from the Fed funds for the CFPB. He said that the administration acted “arbitrarily, capriciously and contrary to law” by adopting a legal opinion from the Office of Legal Counsel (OLC) stating that the CFPB may not request funding from the Fed. That opinion was based on a novel definition of the “combined earnings” of the Federal Reserve Banks as meaning profits and not revenues.

The judge issued an order granting Summary Judgment in favor of the three groups.

Davila’s ruling came in a suit filed by Rise Economy, the Woodstock Institute, and theNational Community Reinvestment Coalition. The groups alleged that Acting CFPB Director Russell Vought decided not to act based on the OLC opinion that stated that the CFPB was not entitled to request any funds from the Fed because the Fed had no combined earnings. Due to the interest rate environment, the Fed began losing money in September 2022, although it has recently returned to profitability.

The OLC had relied on a narrow definition of “combined earnings,” the judge said. The dispute centers on whether the definition means profits, as the OLC argues, or revenues, as the groups challenging the CFPB’s decision maintain.

Davila said that Vought had acknowledged that the CFPB had spent down its reserves but decided he would not seek funds from the Fed because the Fed did not have combined earnings.

Davila said that Vought’s plan used a “clearly erroneous interpretation” that “frustrates Congress’s intent to insulate the Bureau’s funding stream from this exact transparent display of partisanship. The purpose of this Order is to ensure the CFPB operates as Congress intended— fully funded and able to ensure that consumers have access to ‘fair, transparent, and competitive’ markets for consumer financial products.”

Davila said that it is clear from the legislative history that Congress intended to create a steady stream of funding for the CFPB, recognizing the critical importance of its continued, uninterrupted work. He said the CFPB’s definition of combined earnings would not only destroy the agency’s independence by forcing it to ask Congress for appropriations, but would also subject the CFPB to intermittent defunding based on unpredictable fluctuations in “the Federal Reserve’s balance sheet—where the CFPB would likely be deprived of its funding in times of nationwide economic upheaval, exactly when the need for its regulatory and consumer-protection functions is most urgent.”

The court also held that Vought is required to request funds each quarter if such funds are reasonably needed to perform statutorily required functions. Significantly, as a preliminary matter, Davila held that the CFPB Director “ has no authority to define or calculate the Federal Reserve’s ‘combined earnings’.” The judge observed that the government and the OLC Memo do not provide “any authority that would allow a director from a different agency, with no financial expertise or familiarity with the Federal Reserve System, to tell the Federal Reserve how to define their ‘combined earnings’ and calculate what those combined earnings are.” Davila concluded that because the Director has no authority to determine the Fed’s combined earnings, the government’s “basis for not requesting funding from the Federal Reserve crumbles.”

Judge Davila issued the following order: “The Court…OrdersDefendants to continue requesting the amount determined by the Director to be reasonably necessary to carry out the authorities of the CFPB from the Federal Reserve….”. It should be noted that the order is open-ended. It literally has no end date.  

The decision strongly reinforces the earlier ruling by Judge Amy Berman Jackson in National Treasury Employees Union v. Vought. Judge Jackson held that that: 

• The government’s interpretation of the statute was “contrary to the text and intent” of the Dodd-Frank Act.
• CFPB leadership must request funding from the Federal Reserve in order to comply with the law and the injunction preserving the agency.   

On January 9, Vought notified Judge Jackson that, in response to her December 30, 2025 opinion in National Treasury Employees Union v. CFPB (DDC), he had requested $145 Million from the Federal Reserve Board to operate the CFPB from January through March of this year. According to press reports, administration officials have indicated that before the end of March they will ask for funds for the next fiscal quarter, which begins on April 1. When he first requested the funds, Vought made it clear that he made the request despite his disagreement with Judge Jackson’s opinion. Despite his disagreement, the CFPB did not appeal Judge Jackson’s decision.

Based on that initial funding request, the CFPB has argued that a similar lawsuit filed in Federal District Court in Oregon by a consortium of Democratic state Attorneys General is moot.

However, the state officials continue to press the lawsuit, since they claim that future funding is uncertain. They maintain that Vought’s decision may be challenged under the Administrative Procedure Act. In light of Judge Davila’s opinion ordering continuous funding, it seems to us that the Oregon lawsuit is moot. 

We are still awaiting a decision of the en banc court in the D.C. District Court of Appeals with respect to the validity of Judge Jackson’s preliminary injunction.