- within Finance and Banking topic(s)
- with readers working within the Transport industries
- within Technology topic(s)
Current and former Democratic members of Congress have told a federal court that the Trump Administration's interpretation of the CFPB's funding mechanism is at odds with Congress' plan to provide the bureau with a stable, independent source of funding.
On December 5, Rise Economy, the National Reinvestment Coalition and the Woodstock Institute filed a lawsuit against the CFPB and its Acting Director Russell Vought in the Federal District Court for the Northern District of California seeking declaratory and injunctive relief related to Vought's determination not to seek funding from the Federal Reserve Board because of an opinion from the Justice Department's Office of Legal Counsel (OLC).
The OLC opined that it would be unlawful under Dodd Frank (which requires that the CFPB may be funded only out of the "combined earnings of the Federal Reserve System") for the Fed to fund the CFPB because "earnings" means "profits" and the Fed has had no combined profits since September 2022. Shortly after the plaintiffs filed their complaint and before the CFPB even responded to the complaint, the plaintiffs filed a motion for summary judgment.
The current and former members of Congress filed an amicus brief in connection with the motion for summary judgment.
In their amicusbrief, the members and former members, including former Sen. Christopher Dodd, D-CT, and former Rep. Barney Frank, D-MA, said that the Trump Administration's interpretation of the CFPB's funding source is incorrect. Dodd and Frank were chairs of the Senate and House Committees, respectively, that produced the legislation named for them that created the CFPB.
Joining in the brief are 22 Democrats on the House Financial Services Committee, including ranking Democrat Rep. Maxine Waters, D-CA, as well as all Democrats on the Senate Banking, Housing and Urban Affairs Committee, including ranking Democrat Sen. Elizabeth Warren, D-MA.
The Trump Administration has told Congress that in Fiscal Year 2026, ending September 30, 2026, the CFPB will need $279.6 million just to maintain its activities that are required by law.
As stated above, under Section 1017 of Dodd Frank, the CFPB is funded from the "combined earnings" of the Federal Reserve. In the past, under the leadership of then-Director Rohit Chopra, the Bureau requested funds from the Fed after September 2022, when the Fed started losing money on a combined basis, and the Fed provided those funds. In making those requests, the CFPB took the position that "earnings" means "revenue" and not "profits."
In their amicus brief, the former and current lawmakers argued that Vought's interpretation of Dodd-Frank is at odds with Congress's plans to provide funding for the bureau. "Even though the Bureau has long understood those 'combined earnings' to include all of the money the various components of the Federal Reserve take in or generate, Vought now adopts the position that the Federal Reserve has 'earnings' only when its total revenue exceeds its interest expenses," they wrote. They added that "under Vought's interpretation, the Bureau is most likely to be deprived of its funding in times of nationwide economic upheaval, exactly when the need for its regulatory and consumer-protection functions is most urgent."
The current and former lawmakers said that Vought's definition of "combined earnings" is a "novel" interpretation and is odds with Congress's plan to establish the CFPB as an independent agency. It would deprive the bureau of a "continuous and stable" source, they said.
They explain that "Congress structured the Bureau—which it charged with sweeping oversight of the nation's largest banks and financial institutions in the aftermath of the 2008 financial crisis—to have a stable source of funding that would enable it to carry out its important work without interruption. Vought's interpretation is wholly at odds with that plan, subjecting the Bureau to intermittent defunding based on unpredictable fluctuations in the Federal Reserve's balance sheet." They add that "Vought's reading of Dodd-Frank is at odds with that statute's text and history and would prevent the bureau from doing its critical work on behalf of the American people."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
