A federal judge ruled Tuesday that the CFPB’s refusal to request funds from the Federal Reserve amounts to a violation of her earlier court orders.
Amy Berman Jackson, a U.S. district judge for the District of Columbia, said the acting director of the Consumer Financial Protection Bureau (CFPB), Russell Vought, must ensure the agency remains funded and operational while an ongoing court battle proceeds.
Judge Jackson rejected a recent legal opinion by the White House’s Office of Legal Counsel that offered a novel interpretation of the CFPB’s funding limitations.
They claimed the CFPB could not request funding from the Federal Reserve, which primarily funds the bureau, because the Fed has not generated a profit since 2022.
“One problem with this is that it is entirely inconsistent with the way the Dodd-Frank Act has been consistently interpreted by all the parties involved,” wrote Jackson, who issued an injunction in March that barred Vought from dismantling the agency while the civil lawsuit proceeded.
Vought, who serves in a dual capacity as director of the White House’s Office of Management and Budget, has been vocal about his intention to euthanize the financial watchdog — not simply fasten it to a shorter regulatory leash.
The National Treasury Employees Union and five other plaintiffs filed a civil lawsuit against Vought in February on behalf of CFPB employees, who alleged the acting director was attempting to wind down the agency. Despite the pending litigation, nearly 90% of CFPB staff received layoff notices in April.
The Dodd-Frank Act, passed by Congress in 2010 in response to the 2008 financial crisis, established the CFPB and its funding mechanism. The government’s funding argument is widely perceived as an attempt to circumvent the March injunction.
Unable to legally request funding, government lawyers claim, the CFPB would run out of money as early as January, thereby preventing the bureau from cutting paychecks for the CFPB employees that a separate April injunction, also issued by Jackson, simultaneously reinstated and barred Vought from firing.
“Neither the statute, the injunction, nor the Fed’s willingness to pay has changed; the only new circumstance is the administration’s determination to eliminate an agency created by Congress with the stroke of pen, even while the matter is before the Court of Appeals,” wrote Jackson in the conclusion to her memorandum opinion and order.
In August, a three-judge panel from the U.S. Court of Appeals for the District of Columbia voted 2-1 to overrule Jackson’s April order reinstating fired employees and blocking additional firings, allowing the mass layoffs to proceed.
However, earlier this month the full D.C. Circuit Court of Appeals agreed to hear arguments in the case, negating the decision of the appeals court panel. A hearing is scheduled for February.
“It appears that defendants’ new understanding of ‘combined earnings’ is an unsupported and transparent attempt to starve the CPFB of funding and yet another attempt to achieve the very end the Court’s injunction was put in place to prevent,” said Jackson.
