EUGENE, Ore. — A federal judge has rejected the Trump administration’s attempt to cut off funding for the Consumer Financial Protection Bureau, finding that its refusal to seek money from the Federal Reserve violated federal law and the constitutional separation of powers.
U.S. District Judge Ann Aiken’s Sept. 25 ruling marked the third court decision rejecting the administration’s argument that the CFPB cannot receive funding when the Federal Reserve is operating at a loss, according to Bloomberg Law and ABA Banking Journal. Federal courts in Washington, D.C., and California previously rejected that interpretation.
Aiken granted partial summary judgment to a coalition of states challenging former acting CFPB Director Russell Vought’s decision to stop requesting funding. California Attorney General Rob Bonta’s office said the ruling requires current acting Director Mark Paoletta to request the funding necessary for the bureau to perform its legally mandated work.
Dispute Over Federal Reserve Earnings
The dispute centers on the CFPB’s funding structure, which allows it to receive money directly from the Federal Reserve rather than through Congress’ annual appropriations process. The bureau’s director determines the amount reasonably necessary to carry out its responsibilities, subject to statutory limits.
Vought relied on a November 2025 opinion from the Justice Department’s Office of Legal Counsel concluding that the law’s reference to the Federal Reserve’s “combined earnings” meant profits after subtracting interest expenses from revenue. Under that interpretation, the Fed could not transfer money to the CFPB when it had no profits.
Aiken rejected that interpretation and the resulting refusal to seek funding. The court’s opinion noted that the Supreme Court upheld the constitutionality of the CFPB’s funding structure in 2024.
ABA Banking Journal reported that the earlier rulings likewise found the administration’s explanation inconsistent with federal law. House Republicans separately have introduced legislation to fund the CFPB through the congressional appropriations process, the publication reported.
Funding Requests Did Not End Case
The CFPB has requested approximately $273 million for the remainder of fiscal 2026 following the earlier court decisions, Bloomberg Law reported.
The administration argued that subsequent funding requests and the Federal Reserve’s return to profitability made the states’ lawsuit moot. Aiken disagreed, noting that the administration had appealed the earlier decisions and indicated it intended to rely on the Justice Department opinion if those appeals succeeded.
That left the possibility that funding could again be withheld if the Fed returned to operating at a loss, according to Bloomberg Law’s account of the ruling.
States Cited Risks To Consumer Protection
The states argued that cutting off funding would jeopardize the CFPB’s consumer complaint system and the mortgage lending information they use to enforce consumer protection and anti-discrimination laws.
The court’s opinion describes how state regulators rely on complaint information shared through the bureau’s government portal and data collected under the Home Mortgage Disclosure Act.
Bonta’s office said the decision largely resolves the coalition’s lawsuit, subject to appeal.
