Federal Judge Blocks White House Effort to Cut Off CFPB Funding

By Ginika Igboke

A federal judge ruled Tuesday that the White House cannot allow funding for the Consumer Financial Protection Bureau (CFPB) to lapse, dealing a setback to the Trump administration’s efforts to dismantle the agency.

In her decision, U.S. District Judge Amy Berman Jackson said the CFPB must continue receiving its funding from the Federal Reserve, even though the central bank is currently operating at a loss. The administration has argued that the bureau should be dissolved, claiming its funding mechanism is unlawful.

The CFPB has been largely inoperable since President Donald Trump took office nearly a year ago. Most employees have been barred from performing their duties, and much of the agency’s activity this year has focused on undoing work carried out during the Biden administration and Trump’s first term.

The White House has maintained that the CFPB cannot legally draw funds from the Federal Reserve if the Fed lacks “combined earnings” to allocate to the bureau. Administration officials warned that without additional funding, the CFPB would exhaust its operating funds by January and would need to seek appropriations directly from Congress under the Constitution’s Appropriations Clause.

Judge Jackson rejected those arguments, writing that the administration had “manufactured” a rationale to justify cutting off the bureau’s funding. She said neither the law governing the CFPB, nor prior court injunctions, nor the Federal Reserve’s willingness to provide funds had changed.

“The only new circumstance is the administration’s determination to eliminate an agency created by Congress with the stroke of a pen, even while the matter is before the Court of Appeals,” Jackson wrote.

She added that the administration’s reinterpretation of “combined earnings” appeared to be an unsupported effort to starve the CFPB of funds and circumvent a court injunction designed to prevent that outcome.

Earlier this year, Jackson also ruled that the Trump administration could not dismantle the CFPB, which had been an early target of the Department of Government Efficiency, a task force created to reduce fraud and waste in the federal government.

This month, roughly two dozen Democrat-led states filed a lawsuit against the White House and Office of Management and Budget Director Russell Vought, seeking to block any withholding of funds from the agency. The states argued that cutting off funding would weaken financial protections for consumers.

Republicans, however, have long criticized the CFPB, accusing the agency of using politicized and aggressive tactics against financial institutions.