Third District Court Rejects OLC’s Interpretation Of CFPB Funding Statute

Judge Aiken Holds That “Combined Earnings” Means Federal Reserve Revenue, Not Profit

In a September 25, 2026, decision, Judge Ann Aiken of the U.S. District Court for the District of Oregon became the third federal district judge to reject the Office of Legal Counsel’s interpretation of the statutory mechanism Congress established to fund the Consumer Financial Protection Bureau. In State of New York v. Vought, Judge Aiken held that the “combined earnings” of the Federal Reserve System, from which the CFPB is funded, means the Federal Reserve’s gross revenues before expenses are deducted. She also held that the CFPB Acting Director has a statutory duty to request the funds that he determines are reasonably necessary for the Bureau to carry out its responsibilities.

The CFPB’s funding mechanism is unusual. Rather than relying on the annual congressional appropriations process, Congress directed the Federal Reserve Board to transfer to the CFPB, from the Federal Reserve System’s “combined earnings,” the amount the CFPB Director determines is reasonably necessary to carry out the Bureau’s statutory responsibilities. 12 U.S.C. § 5497(a)(1).

The dispute arose after the Federal Reserve’s interest expenses exceeded its income. The Office of Legal Counsel concluded in November 2025 that “combined earnings” meant the Federal Reserve’s profits after deducting interest expenses. Because the Federal Reserve was operating at a loss under that calculation, OLC concluded that there were no funds available for the CFPB to request from the Federal Reserve. Acting Director Russell Vought adopted that interpretation and declined to request additional Federal Reserve funding.

Judge Aiken rejected that interpretation. She found that the ordinary meaning of “earnings” refers to revenue before expenses are deducted and noted that OLC’s interpretation did not actually deduct all expenses. Instead, it treated only interest expenses as deductions. The court also relied on the structure and purpose of the CFPB’s funding statute, concluding that adopting OLC’s interpretation would make the Bureau’s funding dependent on fluctuations in interest rates and the Federal Reserve’s balance sheet.

Judge Aiken therefore joined two other district courts that had already reached the same conclusion.

Two Earlier District Court Decisions Reached the Same Result

The first was Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia in National Treasury Employees Union v. Vought. In a December 30, 2025, memorandum opinion and order, Judge Jackson held that “combined earnings” means everything the Federal Reserve earns before expenses are deducted. She rejected the OLC interpretation and concluded that the administration could not use that interpretation as a basis for declining to request CFPB funding.

The second was Judge Edward Davila of the U.S. District Court for the Northern District of California in Rise Economy v. Vought. Judge Davila likewise rejected the OLC interpretation, holding that “combined earnings” means Federal Reserve revenue rather than profits after expenses. He also concluded that the CFPB Director has a duty to request the funding necessary to operate the Bureau. Judge Davila’s decision was issued in March 2026. 

Thus, Judge Aiken’s decision is the third district court decision rejecting the OLC’s interpretation. Although the earlier decisions are sometimes described as having resolved the issue already, they were issued only months before Judge Aiken’s ruling.

The Acting Director Must Request Funding

Judge Aiken separately addressed whether the CFPB Acting Director has an affirmative obligation to request funding from the Federal Reserve.

The court answered yes. Section 5497(a)(1) provides that the Federal Reserve Board “shall transfer” to the CFPB the amount “determined by the Director to be reasonably necessary” to carry out the Bureau’s authorities. Judge Aiken concluded that this statutory structure necessarily includes a duty on the part of the Director to make the funding request.

The court also noted that, as recently as November 2025, Vought himself had described his statutory obligation as requiring him to request funding, but concluded that the amount legally available for him to request was zero based on the OLC opinion. Judge Aiken found that position inconsistent with the statute.

Why Was the Oregon Case Not Moot?

One potentially important question was why the Oregon case remained justiciable when the Federal Reserve had returned to a financial position in which funding could again be transferred to the CFPB and Vought had, pursuant to court orders, made a funding request.

Judge Aiken rejected the mootness argument because those developments did not resolve the underlying dispute. The plaintiffs were challenging Vought’s adoption of the OLC interpretation and his determination that he was not required to request Federal Reserve funding whenever the Federal Reserve was not profitable under that interpretation.

The court reasoned that the dispute could recur if the Federal Reserve again incurred expenses exceeding its income. A determination that the case was moot based on the Federal Reserve’s current financial condition would therefore leave the plaintiffs exposed to the same controversy if the Federal Reserve again recorded losses. Vought’s subsequent request for funds, made pursuant to court orders and under protest, likewise did not eliminate the controversy over the legality of his interpretation.

Judge Aiken also declined to apply the Ninth Circuit’s prudential-mootness doctrine, noting that the Ninth Circuit has not generally adopted that doctrine outside a narrow bankruptcy context.

The CFPB has not appealed and is unlikely to appeal any of these 3 decisions. Once Judge Jackson (who is still handling the lawsuit challenging Vought’s reduction-in-force order and other actions taken by the Vought to minimize the CFPB, these other lawsuits became superfluous and, using football vernacular, consisted of “piling on.” Russell Vought is no longer Acting Director, Mark Paoletta is in a caretaker role pending the Senate’s confirmation of Bruce Johnson’s nomination by Trump. Judge Jackson’s opinion alone would prevent any Director (Acting or otherwise) from relying on the OLC opinion as a basis to cease requesting funding from the CFPB.

Separation of Powers

Judge Aiken went beyond statutory interpretation and held that Vought’s refusal to request Federal Reserve funding also violated the separation of powers provision in the U.S. Constitution.

The court reasoned that Congress had established a funding mechanism designed to provide the CFPB with a source of funding outside the ordinary appropriations process. By refusing to use that mechanism based on an erroneous interpretation of the statute, Vought had effectively prevented the CFPB from obtaining funds that Congress had authorized.

Judge Aiken concluded that this amounted to an attempt by the Executive Branch to exercise Congress’s constitutional “power of the purse.” The court therefore held that the challenged decisions violated the separation of powers in addition to violating the Administrative Procedure Act. 

The Court’s Remedy

Judge Aiken vacated Vought’s challenged decisions and declared that they were contrary to law, constituted unlawfully withheld agency action, and violated the constitutional separation of powers.

The court also expressly declared that “combined earnings” under Section 5497(a)(1) means the Federal Reserve’s gross revenues without deduction for expenses and that the Federal Reserve is required to transfer to the CFPB the amount the Director determines is reasonably necessary to carry out the Bureau’s operations.

The court declined, however, to issue an injunction concerning CFPB funding for fiscal year 2026 because the fiscal year was nearing its end. Indeed, she only vacated Vought’s decision not to seek any funding and declared that his decision was a violation of the APA and the Constitution separation of powers requirement.

Judge Aiken’s decision therefore leaves little doubt about the district-court consensus: the statutory term “combined earnings” does not mean Federal Reserve profits after expenses, and the CFPB Director cannot simply decline to request funding because the Federal Reserve is operating at a loss.