CFPB gets a reprieve

A federal district court judge rejected Trump Administration assertions that it is legally barred from securing funding for the Consumer Financial Protection Bureau. The opinion holds at least until an appeals court ruling, scheduled to be handed down in February, in a case brought by the National Treasury Employees Union, which represents CFPB employees.

Russell Vought, director of the Office of Management and Budget as well as the CFPB, has been trying to shut down the consumer watchdog agency since the administration took over in January 2025. In November, he proffered an administration legal opinion that asserted the bureau can only be funded by the Federal Reserve's "profits."

Disagreement on funding

Unlike other federal agencies, the CFPB is funded by the Federal Reserve, which gets its money from interest earned on the U.S. government securities it holds as well as fees charged financial institutions for payments clearing and settlement services.

Vought has argued that obtaining CFPB funding from the Fed would violate the bureau's founding rules because the Fed has not been turning a profit. As a result, the bureau has faced an imminent funding lapse, which in turn would force it to shut its doors.

U.S. District Court Judge Amy Berman Jackson rejected the Administration's assertions, however, depicting them as "an unsupported and transparent attempt" to shut down the agency in violation of her order barring the administration from doing so, according to reporting by CNBC.

Jackson pointed out that the Fed had provided funding for the CFPB seamlessly since 2011, even in the years since 2022 during which it has not turned a profit. The Fed, in early December 2025, started operating in the black for the first time since 2022, according to reporting by Politico.

The CFPB was created under the 2010 Dodd-Frank Act to protect consumers against nefarious providers of financial services.

States pile on legal fracas

It's not just the Treasury Department's employees union fighting Vought. Last month the attorneys general of 21 states and the District of Columbia sued the Trump Administration to stop its defunding of the CFPB.

The coalition of states argued in its lawsuit that the administration's decision not to seek funding for the CFPB is unlawful and unconstitutional. Beyond its consumer protection responsibilities, the bureau is legally mandated to provide information the states use to aid their own consumer protection efforts, the state attorneys general have asserted, a duty it cannot fulfill without funding.

"Defunding the Consumer Financial Protection Bureau will make it harder to stop predatory lenders, scammers and other bad actors from taking advantage of New Yorkers," New York Attorney General Letitia James said in a Dec. 22 statement. "My office and attorneys general across the country rely on the CFPB for consumer complaints and other data to get justice for consumers."

States also regularly refer consumer complaints to the CFPB for further assistance, James noted in her statement. Since 2023, for example, New York has referred 2,170 consumer complaints to the CFPB.

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