Banking and Finance Law Daily Wrap Up, CONSUMER FINANCIAL PROTECTION BUREAU—D. Ore.: CFPB funding withholding decision vacated; ‘profits’ reading of funding statute rejected, (Sep 28, 2026)

By Shashi Kant, BALLB, LL.M.

The court held that Vought’s refusal to request Federal Reserve funding violated federal law and the constitutional separation of powers.

A federal district court in Oregon granted partial summary judgment to 22 states and the District of Columbia, vacating decisions by Consumer Financial Protection Bureau (CFPB) Acting Director Russell Vought not to request bureau funding from the Federal Reserve (Fed). The court declared that the decisions were contrary to law, constituted unlawfully withheld agency action, and violated the constitutional separation of powers. It further declared that the Fed’s “combined earnings” under 12 U.S.C. §5497(a)(1) means the Fed’s gross revenues without any deduction for expenses. The Fed must transfer to the CFPB from those earnings the amount the CFPB Director determines is reasonably necessary to carry out the bureau’s operations, the court said (State of New York v. Vought, No. 6:25-cv-02384-AA (D. Ore. Sept. 25, 2026)).

State reaction. New Jersey Attorney General Jennifer Davenport, whose office co-led the coalition, said the order “tells Vought to do what the law requires: fund the CFPB.” California Attorney General Rob Bonta said the decision means that CFPB Acting Director Mark Paoletta must request necessary funding from the Fed. Bonta said the order resolves the lawsuit in large part, pending appeal.

Funding dispute. Congress funded the CFPB through transfers from the Fed rather than through annual appropriations. On November 7, 2025, the Department of Justice Office of Legal Counsel (OLC) concluded that “combined earnings” refers to the Fed’s profits, calculated by subtracting interest expenses from revenues, the opinion states (see Banking and Finance Law Daily, Nov. 12, 2025). On November 20, 2025, Vought told the President and Congress that the amount available for the bureau to request under that reading was “legally $0,” according to the court. The states filed suit on December 22, 2025 (see Banking and Finance Law Daily, Jan. 2, 2026).

The court noted that two other federal district courts had already rejected the OLC reading. On December 30, 2025, the U.S. District Court for the District of Columbia held in National Treasury Employees Union v. Vought (NTEU II) that the decision not to request funding contravened its earlier preliminary injunction (see Banking and Finance Law Daily, Mar. 31, 2025, and Jan. 2, 2026). According to the opinion, Vought then requested $145 million from the Fed under protest on January 9, 2026. On March 13, 2026, the U.S. District Court for the Northern District of California held in Rise Economy v. Vought that reliance on the OLC interpretation was arbitrary and capricious and contrary to law (see Banking and Finance Law Daily, Dec. 8, 2025, and Mar. 16, 2026). Both decisions are on appeal, the court said.

Mootness and standing. The court rejected the defendants’ argument that the case was moot. It said the NTEU II and Rise Economy rulings did not end the controversy because both are on appeal. The court also said the Fed’s apparent return to profitability was irrelevant. According to the court, the states challenge whether Vought had authority to decide the Fed’s profitability in the first place. The court found that the states had standing based on informational injury. It cited the statutory requirement that the CFPB share consumer complaint information with states, as well as the bureau’s role in publishing Home Mortgage Disclosure Act data.

Final agency action. The court held that Vought’s November 20 letters were final agency action. The court said the letters were not tentative, because Vought told the President and Congress in plain terms that he relied on the OLC memo and was requesting $0. The court also held that §5497(a)(1) requires the Director to communicate the bureau’s funding needs to the Fed so that the Fed can make the mandatory transfer.

Combined earnings. The court joined the NTEU II and Rise Economy courts in holding that “combined earnings” means revenue before expenses are subtracted. The court said the primary dictionary definitions of “earnings” support the states’ reading. It rejected the OLC memo’s reliance on business and accounting definitions, stating that the Fed’s statutory role is not to generate profit. Turning to the statute’s purpose, the court said, quoting Rise Economy, that Congress intended to create a steady stream of funding for the CFPB, “insulated from partisan politics in Congress.”

Separation of powers. The court said the states presented evidence that the administration, acting through Vought, had taken the shuttering of the CFPB as a policy objective. According to the court, Vought pursued that objective by frustrating the appropriations system Congress devised for the bureau. The court concluded that Vought “arrogated to himself the ‘power of the purse,’” which belongs exclusively to Congress.

Remedy. The court vacated the challenged decisions and granted the declaratory relief the states sought. Citing the pending end of fiscal year 2026, the court declined to issue injunctive relief on the bureau’s funding for that year.

Attorneys: Patrick Gibson, New York State Office of the Attorney General, for State of New York. Leanne E. Hartmann, Oregon Department of Justice, for State of Oregon. Amanda McElfresh, New Jersey Attorney General, for State of New Jersey. Alexander James Yun, U.S. Department of Justice, for Russell T. Vought.

Companies: State of New York; State of Oregon; State of New Jersey

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