- Key insight: When the Trump administration took over the CFPB in early 2025, its acting director, Russell Vought, set the agency's funding request to zero in an attempt to starve the bureau of funding.
- What's at stake: Vought, the architect of Project 2025, claimed at the time that the Federal Reserve had no "combined earnings" to fund the CFPB due to high interest rates causing technical losses.
- Supporting data: Judge Ann Aiken clarified that the Fed's "combined earnings" refers to gross revenue before interest expenses. She ruled that Vought violated the Constitution's separation of powers by seizing Congress' "power of the purse."
A federal judge has ruled that the Trump administration's attempt last year to halt funding for the Consumer Financial Protection Bureau was unlawful and unconstitutional.
On Friday, U.S. District Judge Ann Aiken
Unlike many federal agencies that rely on annual funding votes by Congress, the CFPB receives its budget directly from the Federal Reserve Board. The 2010 Dodd-Frank Act, which created the CFPB, states that the Fed transfers funds based on the amount the CFPB director determines is "reasonably necessary" for the agency to operate. The funding is capped at 6.5% of the Fed's 2009 inflation-adjusted operating expenses.
California Attorney General Rob Bonta, who led the coalition of 22 attorneys general, said any effort to refuse congressionally authorized funding will be rejected in the future.
The judge's order "demands the agency continue to be lawfully funded in order to keep up this important work, and halts the federal government from playing games with the financial protection of consumers in the future," Bonta said in a press release.
In February 2025,
Vought then claimed, relying on
Vought did not, at that time, assert that the CFPB could not seek funding from the Fed, but instead he asserted that the agency had sufficient cash reserves and no additional funding was needed.
A coalition of states — led by New York, Oregon, California and others — filed suit, arguing that shutting off funding deprived state agencies of critical law-enforcement data and consumer-complaint tracking tools that they rely on to enforce the law.
"The shuttering of the CFPB emerged as an objective of the administration," Judge Aiken wrote in the
After that earlier injunction was in place, Vought sought the opinion of the DOJ's Office of Legal Counsel on the question of whether the CFPB could continue to draw funds from the Federal Reserve System, which was operating at a loss. In a November 2025 memo, the OLC stated that "if the Federal Reserve has no profits, it cannot transfer money to the CFPB … the proper method for obtaining additional funds is to request them from Congress pursuant to the Appropriations Clause."
Read more:
As fintechs nab bank charters, what's happening to BaaS? Overheated data center knocked 23 credit unions offline Chris Britt still says banking is broken, but Chime can fix it Credit unions bulk up a business that banks long dominated
The district court in the NTEU case rejected Vought's position — as did Judge Aiken.
She took issue with several aspects of the administration's arguments, pointing to the plain meaning of the word "earnings," the Constitution's separation of powers and Vought's mandatory duty under the law to request funds.
Aiken held that "combined earnings" refers to the Federal Reserve's total revenue before deducting interest expenses. She said that treating the Fed's "earnings" as net profits ignores standard legal definitions and
(In February 2025, Jerome Powell, who was the chair of the Federal Reserve, testified before a congressional committee that the Fed is required to fund the CFPB even when the Fed is operating at a loss, by recording deferred assets.)
Regarding the constitutional separation of powers, Aiken ruled that the administration attempted to "arrogate to itself the 'power of the purse'" — an authority that belongs exclusively to Congress — by using an erroneous legal interpretation to starve an agency created by law.
The Oregon judge also clarified that the CFPB director has a mandatory duty to calculate and request the funds required to run the agency and to communicate that need to the Federal Reserve.
Whether Aiken's ruling will have any practical impact is unclear, since it and related court rulings are subject to appeal.
In the case brought by the states, Vought and the CFPB argued that the plaintiffs' arguments were rendered moot by the injunction in the NTEU case, which required Vought to request funding, and because the Fed returned to profitability.
In a third lawsuit, a district judge in northern California ruled in March 2026 that the OLC's decision was "arbitrary and capricious," in violation of the Administrative Procedure Act, and therefore illegal.
That judge formally vacated Vought's funding determinations and issued a declaratory judgment confirming that the Federal Reserve must transfer funds requested by the CFPB from its gross revenues.
While the Oregon ruling stops short of issuing a new injunction, it provides a legal precedent, alongside the two similar decisions issued by the federal courts in Washington, D.C., and California.
Appeals in the two parallel cases remain pending before federal circuit courts; the California case is currently on appeal before the 9th Circuit.
