A federal judge has ruled that the Consumer Financial Protection Bureau (CFPB) must continue getting its funding from the Federal Reserve, dealing a setback to Trump administration efforts to effectively shut down the agency.
The ruling Friday by U.S. District Judge Edward Davila in San Jose blocks acting CFPB Director Russell Vought from using a new legal interpretation that would have cut off the agency’s funding stream.
Litigation centers on dispute over language in the 2010 Dodd-Frank Act — the law that created the CFPB after the 2008 financial crisis.
Unlike most government agencies, the CFPB doesn’t get its money from Congress through annual appropriations. Instead, it’s funded directly from the Federal Reserve, which raises money through bank fees and other activities.
Current law states the Fed shall transfer money to the CFPB from the “combined earnings” of the Federal Reserve System.
Vought, who was named acting director in February 2025, asked the Office of Legal Counsel for an opinion on what “combined earnings” means. In November, that office concluded it means profits — meaning if the Fed isn’t profitable, the CFPB can’t get money from it.
Based on that opinion, Vought decided not to ask the Fed for money. He instead asked Congress directly for funding, a process that would have required lawmakers to pass a new spending bill.
Three nonprofit groups that rely on CFPB data — Rise Economy, the Woodstock Institute and the National Community Reinvestment Coalition — sued, arguing Vought’s interpretation was wrong and would effectively starve the agency.
Judge Davila agreed.
He found that Vought’s interpretation “frustrates Congress’s intent to insulate the Bureau’s funding stream from this transparent display of partisanship.”
The judge noted that Vought said publicly this past October that he was working to “close down the agency” and would be successful within months.
In his ruling, Davila wrote that Vought’s plan to shut down the CFPB using “this clearly erroneous interpretation” goes against what Congress intended when it created the agency.
The court declared that Vought’s reliance on the legal opinion was “arbitrary, capricious and in violation of law,” and ordered the CFPB to keep requesting money from the Federal Reserve as the law requires.
The CFPB was created to oversee financial products like mortgages, credit cards and payday loans. It handles consumer complaints and collects data on lending practices that groups use to track whether banks are properly serving their communities.
Without that funding, plaintiffs argued, they would lose access to information they need to do their work.
The judge found that argument convincing, saying the groups had shown they would suffer “informational harm” if the CFPB lost funding.