Banking and Finance Law Daily Wrap Up, CONSUMER FINANCIAL PROTECTION BUREAU—Congressional Democrats back nonprofits’ challenge to Vought’s refusal to fund CFPB, (Dec 16, 2025)

By Shashi Kant, BALLB, LLM.

The nonprofits and Democratic lawmakers urge a California federal district court to grant summary judgment requiring CFPB funding amid a dispute with the Bureau over Federal Reserve earnings.

A coalition of nonprofit organizations and Democratic lawmakers urged a federal district court in California to grant summary judgment in litigation over Acting Consumer Financial Protection Bureau Director Russell Vought’s refusal to request funding for the agency. In this matter, nonprofit plaintiffs Rise Economy, the National Community Reinvestment Coalition, and the Woodstock Institute seek declaratory and injunctive relief requiring the CFPB to request funding from the Federal Reserve under Section 5497 of the Dodd-Frank Act. The case is pending in the U.S. District Court for the Northern District of California before Judge Edward J. Davila (Rise Economy v. Vought, No. 5:25-cv-10481-EJD (N.D. Cal. Dec. 15, 2025)).

Plaintiffs’ summary judgment motion. In their motion, the plaintiffs contend that the Dodd-Frank Act imposes a mandatory obligation on the CFPB Director to determine and request the amount of funding “reasonably necessary” to carry out the Bureau’s statutory authorities. They argue that the statute does not grant discretion to decline to make a funding request and that the CFPB’s November 2025 decision not to request funds violates the Administrative Procedure Act.

According to the motion, Congress created the CFPB in the aftermath of the 2008 financial crisis and intentionally insulated the agency from the annual appropriations process by providing a standing funding mechanism tied to the Federal Reserve System. Plaintiffs assert that this structure was designed to ensure continuity of consumer financial protection functions regardless of political or economic conditions.

The plaintiffs challenge the CFPB’s reliance on a November 2025 opinion from the Department of Justice’s Office of Legal Counsel that interpreted “combined earnings of the Federal Reserve System” to mean profits after interest expenses. Based on that interpretation, Acting Director Vought concluded that the Federal Reserve lacked earnings from which the CFPB could draw funds and therefore declined to request additional funding.

The motion argues that this interpretation conflicts with the statutory text, structure, and history of Section 5497. Plaintiffs further assert that the decision rests on an incorrect factual premise, stating that Federal Reserve financial data show the System has generated positive earnings even under the administration’s interpretation. Plaintiffs also allege concrete harm from the funding halt. They state that the CFPB has been operating solely on reserves that are projected to be exhausted in early 2026, which would force the Bureau to suspend statutory duties. According to the motion, a lapse in funding would disrupt consumer complaint processing, publication of complaint data, and maintenance of Home Mortgage Disclosure Act data relied upon by researchers, policymakers, and community organizations, including the plaintiffs themselves.

Amicus support from congressional Democrats. Current and former members of Congress, including every Democrat on the Senate Banking, Housing, and Urban Affairs Committee and 22 Democrats on the House Financial Services Committee, supported the plaintiffs’ motion for summary judgment. Moreover, former Sen. Christopher Dodd and former Rep. Barney Frank, the principal sponsors of the Dodd-Frank Act, also joined the filing of the amicus brief in support of the plaintiff nonprofits.

In their amicus brief, the lawmakers state that Congress deliberately designed the CFPB’s funding mechanism to provide stable and continuous support for the agency’s operations. They argue that tying CFPB funding to fluctuations in Federal Reserve profitability would subject the Bureau to repeated funding interruptions, a result they say Congress sought to avoid after identifying inconsistent funding as a contributor to regulatory failures preceding the 2008 financial crisis. The amici contend that the term “combined earnings” was intended to encompass the Federal Reserve System’s overall revenues and not to depend on accounting treatment of interest expenses. They state that the CFPB’s long-standing interpretation of the provision aligns with congressional intent and that the new interpretation undermines the Bureau’s independence as a financial regulator.

Lawmakers’ statement. In a statement accompanying the amicus filing, Senate Banking Committee Ranking Member Elizabeth Warren and House Financial Services Committee Ranking Member Maxine Waters stated that the brief challenges what they described as the administration’s unlawful effort to withhold funding from the CFPB. The statement notes that Dodd and Frank joined the filing to clarify congressional intent behind the funding structure enacted in Dodd-Frank. The statement further asserts that the court should reject the new interpretation of Section 5497 and require the CFPB to request funding as provided by statute.

Background. The dispute arises from Acting Director Vought’s November 2025 decision not to request additional CFPB funding from the Federal Reserve following a Department of Justice Office of Legal Counsel opinion concluding that the Federal Reserve lacked combined earnings available for transfer. In prior filings, the nonprofit plaintiffs alleged that Vought requested $0 in funding for the third quarter of fiscal year 2025 and announced plans to operate the CFPB solely on reserves projected to be exhausted in early 2026 (see Banking and Finance Law Daily, Dec. 8, 2025).

The plaintiffs further alleged that the CFPB had, for more than a decade, interpreted combined earnings of the Federal Reserve System to include all income generated by the System and that the new interpretation departed from that understanding. Parallel litigation in the District of Columbia has raised related questions about the OLC opinion and the Federal Reserve’s ability to meet CFPB funding requests, including filings by former Federal Reserve officials disputing the premise that a lack of profits prevents the System from covering CFPB operating expenses (see Banking and Finance Law Daily, Dec. 8, 2025).

Attorneys: Stephanie Garlock (Public Citizen Litigation Group) and Michael W. Bien (Rosen Bien Galvan & Grunfeld LLP) for National Community Reinvestment Coalition, Rise Economy, and Woodstock Institute. Elizabeth B. Wydra, Brianne J. Gorod, Miriam Becker-Cohen, and Joshua D. Blecher-Cohen (Constitutional Accountability Center) for amici curiae members and former members of Congress.

Companies: National Community Reinvestment Coalition; Rise Economy; Woodstock Institute

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