California Court Orders CFPB To Continue Requesting Federal Reserve Funding

On March 13, a California federal court ordered the CFPB to continue requesting from the Federal Reserve the funds reasonably necessary to carry out the Bureau's statutory authorities under the Consumer Financial Protection Act. 

The court rejected the CFPB's reliance on an Office of Legal Counsel's interpretation of Section 1017 of the Act that treated the Federal Reserve's recent lack of accounting profits as a basis to stop requesting transfers. Judge Edward Davila held that the Bureau acted arbitrarily, capriciously, and contrary to law by adopting that interpretation and refusing to request funding on that basis. In doing so, the court reinforced that the CFPB's funding mechanism remains tied to the statutory process Congress created, under which the Director determines the amount reasonably necessary and requests that amount from the Federal Reserve. 

Putting It Into Practice:  The ruling follows the CFPB's January 9 request for $145 million, which the Bureau submitted after an earlier court order (previously discussed here). Although broader litigation over the Bureau's operations and future scope remains ongoing, this order makes clear that the CFPB cannot use its interpretation of “combined earnings” to suspend the statutory funding process. Even as disputes over the CFPB's funding structure continue, parallel litigation over staffing and leadership direction suggests the Bureau may operate with a smaller footprint and more targeted priorities. Companies should continue planning for CFPB oversight, supervision, and enforcement activity even as the agency's leadership and litigation posture remain in flux.

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