Justice Department Warns That CFPB Is Running Out Of Funds To Operate

The CFPB is running out of money and has no legal way to replenish its coffers, absent Congressional appropriation, the Trump Administration told a federal court.

The bureau "anticipates exhausting its currently available funds in early 2026," the Justice Department told the U.S. District Court for the District of Columbia as part of a lawsuit filed by the National Treasury Employees Union (NTEU).

Under Section 1017 of Dodd Frank, the CFPB is funded from the "combined earnings" of the Federal Reserve System. In the past, the bureau has requested funds for the agency and the Fed has provided those funds. However, in a November 7 opinion interpreting Section 1017, the DoJ Office of Legal Counsel concluded that since the Federal Reserve System has no combined earnings, no funds are available for the bureau.

The CFPB has not asked for funds from the Fed during the Trump Administration and has been operating on funds it already had.

We and others have made the point that the CFPB cannot be funded, as the Federal Reserve System has no combined earnings and has been running a deficit for quite some time. See our posts, here, and here.

In addition, Professor Hal Scott of Harvard Law School has made that argument on our podcast. To read our blog about Professor Scott's op-ed in the Wall Street Journal, which includes a link to the op-ed, click here. To read his two articles published on the website of the Committee on Capital Markets Regulation, click here and here.

The administration has long said it wants to shutter the CFPB. Most recently, Acting CFPB Director Russell Vought has said that he wants to close the agency within the next two or three months. That may now happen, with the bureau running out of funds.

The administration already has attempted to lay off more than 1,400 agency employees.

The NTEU sued the Administration, contending that the Administration's plan to lay off those employees amounted to an abolishment of the agency, something only Congress could do.

A divided three-judge panel of the D.C. Circuit had dissolved a lower court injunction blocking the firings, which it said the Trump Administration could resume.. However, when it dissolved the injunction, the panel withheld the mandate in the case to give the plaintiffs the opportunity to file a petition for a rehearing en banc. The plaintiffs subsequently did so. .

DOJ attorneys said in their latest filing that, in light of the Legal Counsel's opinion, Acting CFPB Director Vought anticipates preparing a report to the President and Congressional appropriations committees identifying the funding needs of the bureau.

"The Bureau does not know whether and the extent to which Congress will appropriate funding to pay the expenses of the Bureau," the administration said. The Supreme Court found the CFPB's funding mechanism constitutional, but Congressional Republicans have long said they believe the CFPB should be funded through the appropriations process. But they also have been outspoken critics of the bureau, so it is unclear how they might address the funding issue. Some Republicans have simply said the bureau should be abolished.

If funding is not provided, the DoJ points out that the Anti-Deficiency Act restricts agencies from operating during a lapse in appropriations.

"The Act generally prohibits agency heads and their employees from making or authorizing expenditures or obligations in excess of or in advance of appropriations unless authorized by law, and from working, even on a voluntary basis, except in very limited circumstances involving 'emergencies involving the safety of human life or the protection of property,'" according to the DoJ.

"The Bureau acknowledges that this Court's injunction, which restricts the agency's conduct regarding employment, contracting, and facilities, among other things, remains in effect," the DoJ said.

However, the attorneys added, "Defendants do not understand any provision of the Court's injunction to impose obligations on the agency that would violate the Anti-Deficiency Act."

Sen. Elizabeth Warren, D-Mass., who helped create the bureau, criticized the administration's funding argument.

"This absurd maneuver by Russ Vought is plainly illegal, and federal judges have already rejected his fringe theory," she said. "If the courts continue to uphold the law, Vought will fail again."

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