- within Insolvency/Bankruptcy/Re-Structuring topic(s)
On December 30, the U.S. District Court for the District of Columbia ordered that the CFPB must continue requesting funding from the Board of Governors of the Federal Reserve System under the statutory funding framework established by Congress. The Court ruled that the CFPB may not decline to request funding based on its interpretation of the Federal Reserve's operating losses or an asserted lack of available "combined earnings." (previously discussed here).
The order followed growing pushback to the CFPB's decision to stop requesting funding from the Federal Reserve, a move that the agency warned would cause it to exhaust available funds in early 2026. In addition, a coalition of state attorneys general, who alleged that declining to request funding would effectively shut down the agency, recently filed a lawsuit, arguing that the cease in funding would disrupt federally mandated consumer protection functions and undermine state enforcement efforts that rely on CFPB data, supervision, and complaint processing.
The D.C. District Court concluded that the statute governing CFPB funding requires the agency to seek the funds necessary to carry out its congressionally assigned responsibilities and that a refusal to do so would be inconsistent with the statutory scheme. The court also found that declining to request funding would effectively eliminate an agency created by Congress, a result that cannot be accomplished without congressional authorization.
Putting It Into Practice: The CFPB's operational posture remains unsettled following its attempted half to funding requests. While the Bureau must now seek funding from the Federal Reserve, questions remain about how these disputes may affect the timing, scope, and intensity of CFPB enforcement, supervision and policy activity this year. We will stay on top of these developments and provide an update as the case progresses.
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