Court Says CFPB Must Seek Fed Funding

A federal district court in Oregon held that the CFPB's decision not to request funding from the Federal Reserve was contrary to law and violated the constitutional separation of powers.

In her ruling, Judge Ann Aiken granted partial summary judgment to a coalition of states and the District of Columbia in State of New York v. Vought. The states challenged two decisions by then-Acting Director Russell Vought: that he could not request funds whenever the Fed's interest expenses exceeded its income, and that he would request nothing for fiscal year 2026. Both rested on a Justice Department memo reading "combined earnings" in 12 U.S.C. 5497 ("Funding; penalties and fines") to mean profits.

The court held that "combined earnings" means the Fed's gross revenue before expenses. It also held that the statute requires the Director to communicate the Bureau's funding needs to the Fed. It joined two other district courts that rejected the same memo in National Treasury Employees Union v. Vought and Rise Economy v. Vought. Both of those rulings are on appeal.

On the constitutional claim, the court found that Mr. Vought took Congress's "power of the purse" by using the memo to pursue the administration's goal of shutting down the Bureau. The court held that the decisions "were contrary to law, constitute unlawfully withheld agency action, and violate the constitutional separation of powers."

The court rejected arguments that the case was moot because the Fed had returned to apparent profitability and Mr. Vought had since requested funds. It noted that he made those requests under protest, and only because court orders required him to do so. It found the states had standing because a shutdown would cut off consumer complaint and mortgage lending data they rely on.

The court vacated both decisions and declared the meaning of "combined earnings." It declined to enjoin action on fiscal year 2026 funding because that year was ending.