A federal judge said the acting director of the Consumer Financial Protection Bureau, Russell Vought, unlawfully refused to request funding for the agency.
SAN JOSE, Calif. (CN) – A federal judge said his Friday order to the director of a federal consumer protection agency was intended to ensure it operates as Congress intended, not by government fiat.
said US District Judge Edward Davila in his decision The Consumer Financial Protection Bureau’s decision to waive funding requirements was arbitrary and capricious. He ordered Russell Vought, the bureau’s acting director, to find its funding and do its job.
“Vought’s plan to ‘shut down’ the CFPB using this clearly flawed interpretation of the (law) frustrates Congress’ intent to insulate the bureau’s funding stream from this exact transparent display of partisanship,” said nominee Barack Obama.
Rise Economy and other nonprofits had challenged Vought and the bureau’s decision to stop requesting funds from the Federal Reserve.
Vought had decided that he could not request the funds because the Federal Reserve did not have the combined revenues needed to provide the money. It was the first time since the creation of the Dodd-Frank Act that a director had taken that position, the judge said.
Vought’s decision came a day after President Donald Trump nominated him in February 2025 as the bureau’s acting director. He sent a letter to the Federal Reserve Board asking for zero dollars for the third quarter of the fiscal year, after he had determined that the bureau could operate on existing reserves. Months later, Vought said in an interview that he was working toward closing the agency, which would take several months, the judge said.
The acting director later said the bureau had spent its reserves, though he would not seek funds from the Federal Reserve. He said he lacked the combined earnings and would instead ask Congress for the money. However, lawmakers would have to pass an appropriations bill to fund the bureau, which was not certain.
Lawyers contesting the bureau’s decision in a related case have argued that the most reasonable definition of “combined earnings” is all the money earned by each of the 12 regional banks in the Federal Reserve System. Vought argued that it is instead an ad hoc form of net profit that does not exist anywhere in the wider financial industry.
This case is currently suspended.
When Congress created the bureau, it also created a funding mechanism free of appropriations bills and partisan politics. Congressional funding would only be a stopgap, Davila said.
“As of May 2025, it appears that Congress understood that achieving a stable source of funding requires the Federal Reserve to provide funds regardless of its ‘profits,'” he added.
Vought and the bureau pushed back against the nonprofits’ lawsuit, calling the issue moot. They have already requested and received funding for the current fiscal quarter — a request from another court — and said they will continue to request money if the Federal Reserve remains “profitable.” They also argued that it is impossible for a judge to side with the non-profit because it is only hypothetical that they would not seek funding in the future.
Davila disagreed on both counts.
A temporary order in another court does not remove another judge’s jurisdiction over a similar case. Moreover, willingly seeking funding does not mean the bureau will continue to make those requests, the judge said.
“Here, the plaintiffs’ complaint seeks funding not only for the current fiscal quarter, but funding for every quarter moving forward,” Davila said. “The complaint specifically challenges the defendants’ determination to ‘defund the CFPB’ based on ‘an erroneous interpretation of the statutory provision that creates a standing division for the CFPB.’
Stephanie Garlock, an attorney at the Public Citizen Litigation Group and lead counsel for the plaintiffs, said the Trump administration tried to stop the bureau from doing its job: protecting American consumers.
“Today’s court decision ends that foul play and ensures that the CFPB will have a stable source of funding to support its ongoing work, as Congress intended,” she said in a statement.
A spokesman for the Justice Department could not immediately be reached for comment.
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