A federal judge in California has ordered Consumer Financial Protection Bureau (CFPB) Acting Director Russell Vought to continue requesting operational funds from the Federal Reserve, striking down a legal maneuver designed to strip the agency of its budget.
On March 13, U.S. District Judge Edward Davila granted summary judgment in favor of community advocacy groups, ruling that Vought violated the Administrative Procedure Act by using the Federal Reserve’s recent operating losses as an excuse to halt funding requests. The ruling mandates that Vought fulfill his statutory duty to request funds, clarifying that the Dodd-Frank Act’s phrasing of “combined earnings” refers to the central bank’s revenue, rather than net profits.
Vought, appointed by President Donald Trump in February 2025, has openly stated his goal is to close down the agency. To achieve this, Vought relied on a November 2025 memo from the Office of Legal Counsel (OLC) arguing that the CFPB could not draw from the Fed’s “combined earnings” because the central bank has not generated a profit since late 2022 due to rising interest rates.
Davila rejected this interpretation, finding that the Federal Reserve’s historical practices and unique public function make private-sector definitions of profits inapplicable to the central bank. In a forceful rebuke, the court declared Vought’s reliance on the memo “arbitrary, capricious, and in violation of law.”
The CFPB did not respond to Scotsman Guide’s request for comment by time of publication.
The lawsuit was brought by Rise Economy, the Woodstock Institute and the National Community Reinvestment Coalition. These organizations argued they would suffer “informational injury” if the CFPB ceased publishing critical mortgage lending data under the Home Mortgage Disclosure Act and stopped maintaining its public consumer complaint database, which the groups rely on for their advocacy and community work.
The California court’s decision compounds the legal setbacks for Vought’s efforts to dismantle the financial watchdog. Davila’s ruling follows a similar mandate from a D.C. District Court last December in a separate lawsuit filed by the National Treasury Employees Union on behalf of fired CFPB workers. In that case, U.S. District Judge Amy Berman Jackson also criticized the OLC memo’s theory as an “unsupported and transparent attempt to starve the CFPB of funding.”
In compliance with Jackson’s order, Vought requested $145 million from the Federal Reserve on Jan. 9 to fund the bureau’s second-quarter operations. At the time, Vought wrote to Fed Chairman Jerome Powell that he disagreed with the court’s opinion but was requesting the amount necessary to carry out the bureau’s authorities for the quarter. Prior to this, Vought had requested $0 from Powell in March 2025, claiming the bureau’s reserve funds were excessive.
By law, the CFPB is funded through cash transfers from the Federal Reserve. The quirky funding structure was upheld as constitutional by the U.S. Supreme Court in a 7-2 ruling in 2024. Congress recently lowered the cap on these funding requests to 6.5% of the Federal Reserve’s annual operating expenses under legislation signed in July 2025.
Despite the current temporary funding, the long-term survival of the CFPB remains mired in legal wrangling. The full D.C. Circuit Court of Appeals heard oral arguments on Feb. 24 regarding the appeal of Jackson’s lower court ruling but has yet to rule on the matter.
