The Trump administration must continue to seek funding for the Consumer Financial Protection Bureau (CFPB), a federal judge ruled this week.
The CFPB is a watchdog agency the Trump administration has been trying to dismantle via funding and staffing cuts, NPR reported.
Recently, the administration argued that because the CFPB is funded by money from the Federal Reserve, and because the Fed technically is operating at a loss, there are no valid funds to support the CFPB.
Tuesday, Judge Amy Berman Jackson rejected the administration’s argument, writing that this “would be tantamount to closing what is left of the Bureau.” The ruling upholds an earlier injunction from Jackson to ensure the agency would continue to exist as congressionally mandated, and to stop efforts to shutter the agency, including via layoffs.
Separately, last week a coalition of 21 states and the District of Columbia joined together for a lawsuit to prevent the defunding of the agency, NPR said. They argued that the administration is too narrowly interpreting which Fed funds can be used to support the agency — that they don’t have to be profits, NPR reported.
Conservatives Have Targeted the CFPB
Among its responsibilities, the agency collects people’s complaints against businesses. The agency long has been a target of conservatives who say it’s too aggressive in enforcing consumer protection laws.
President Trump installed Russell Vought as the acting director of the agency, who has mirrored the president’s desire to close the bureau. He ordered a stop to all work at the agency within the first few weeks of Trump’s second inauguration.
At the heart of the case is whether Vought can effectively shut down the agency and lay off all of the bureau’s employees.
The CFPB has largely been inoperable since President Trump has sworn into office nearly a year ago. Its employees are mostly forbidden from doing any work, and most of the bureau’s operations this year has been to unwind the work it did under President Biden and even under Trump’s first term, the AP reported.
In April, layoff notices were sent to about 1,400 of the bureau’s workers.
The National Treasury Employees Union sued to stop the staff reductions. Judge Jackson issued a preliminary injunction blocking the layoffs, but in August an appeals court panel vacated that ruling, saying that the U.S. District Court for the District of Columbia lacked jurisdiction in the case. In December, that panel decision was itself vacated, meaning that the layoffs currently remain blocked.
In Tuesday’s order, Jackson wrote that the administration was “actively and unabashedly trying to shut the agency down again, through different means.”
“Notably, though, not one penny of the funding needed to run the agency that has returned over $21 billion to American consumers comes from taxpayer dollars,” she wrote. “Today, the agency is hanging by a thread.”
CFPB Created After Financial Crisis of 2008
Created in 2010 and operational in 2011 after the financial crisis of 2008, the CFPB has been central to enforcing consumer protection laws across mortgage lending, servicing, and credit markets. Its potential closure would reshape the regulatory environment mortgage professionals have operated under for more than a decade.
Industry reaction remains mixed, however. Supporters of the shutdown say the bureau’s rules have imposed costly compliance burdens, particularly for smaller lenders and credit unions. Critics counter that removing the CFPB could weaken consumer safeguards and inject uncertainty into lending practices.
“Americans have gotten more than $21 billion back in their bank accounts after being cheated and scammed by big corporations, thanks to the CFPB. But Trump and his Administration love grifters and scammers. So they’re trying to kill the agency holding them accountable,” said Sen. Elizabeth Warren on X in October.
