SAN JOSE, Calif. — A federal judge has ruled that the Consumer Financial Protection Bureau acted unlawfully when it refused to request funding from the Federal Reserve, ordering the agency’s leadership to seek the money needed to continue its operations.
In a March 13 decision, U.S. District Judge Edward J. Davila of the Northern District of California said the refusal by acting CFPB Director Russell Vought to request funding from the Federal Reserve violated federal law and frustrated Congress’ intent to ensure the agency’s independence.
Davila granted summary judgment to consumer advocacy groups that had sued the bureau, concluding that the decision not to seek funding was “arbitrary, capricious, and contrary to law” under the Administrative Procedure Act, according to numerous reports.
Ruling Cites Dodd Frank
As the CU Daily has been reporting, the ruling centers on the CFPB’s funding structure created by the 2010 Dodd-Frank Act, which allows the bureau to draw operating funds from the Federal Reserve rather than through the annual congressional appropriations process.
Vought declined in 2025 to request funding from the Federal Reserve, arguing that the central bank could not legally transfer funds because it had been operating at a loss and therefore lacked “combined earnings.”
Davila rejected that interpretation, finding that the CFPB director has a statutory responsibility to determine how much funding the bureau needs and to request it from the Federal Reserve so the agency can carry out its legal duties, according to Reuters.
Director Has a ‘Duty’
“The CFPB Director … has a duty to ensure the Bureau is funded,” Davila wrote in the opinion, adding that refusing to request the funds undermines the statutory system Congress established for the agency, Reuters added.
The judge also rejected a legal opinion from the Justice Department’s Office of Legal Counsel that had argued the Federal Reserve could fund the bureau only when it generated profits. Davila concluded that the interpretation misread the law and improperly allowed the CFPB director to decide whether the Federal Reserve had sufficient “combined earnings.”
As part of the ruling, Davila ordered the CFPB to request funding from the Federal Reserve and issued a declaration that the agency’s earlier refusal to do so was unlawful.
The decision follows a separate court order in another case that had already forced the Bureau to request funding earlier this year. In January, Vought sought about $145 million from the Federal Reserve to cover the agency’s expenses for one fiscal quarter while complying with the court directive.
‘Dismantling’ the Agency
The lawsuit was brought by consumer advocacy groups that argued the administration’s funding stance was an attempt to effectively dismantle the CFPB by cutting off its primary source of funding.
