Judge blocks White House bid to defund CFPB, keeping workers paid

Judge Amy Berman on Tuesday blocked a White House effort to defund the Consumer Financial Protection Bureau, saying the agency must keep receiving its money through the Federal Reserve as it fights a lawsuit over potential mass layoffs and furloughs. Berman’s ruling came only days before CFPB funds would have likely run out, leaving the bureau without money to pay its employees, according to the court opinion described by the Associated Press.

At the center of the case is whether Russell Vought—President Donald Trump’s budget director and the acting CFPB director—can effectively shut down the agency and lay off the workforce. The CFPB has been largely inoperable since Trump took office nearly a year ago, with many employees barred from doing work, and much of the bureau’s activity this year focused on unwinding work done under President Joe Biden and during Trump’s first term.

The Associated Press reported that Berman ruled the CFPB should continue to receive its funds from the Fed, even though the Fed has been operating at a loss. Berman also rejected the White House’s new legal argument about how the CFPB gets its funding, the AP said, describing it as a basis to avoid the existing limits imposed by the court.

Berman’s decision addresses a funding-mechanics dispute: the White House, in recent weeks, advanced an argument that the Federal Reserve had no “combined earnings” available to fund the CFPB’s operations. The CFPB receives funding through expected quarterly payments from the Fed, according to the AP account of the case, and the White House told the court earlier in November that the CFPB would run out of appropriations in early 2026 without new congressional funding.

The AP reported that the White House argument draws on the Fed’s losses on paper since 2022, which the AP said stem from the central bank trying to combat inflation and paying higher interest rates to banks that hold deposits at the Fed. The AP said the Fed records a “deferred asset” expected to be paid down as low-interest bonds mature off the Fed’s balance sheet.

In her opinion, Berman said the Office of Legal Counsel and Vought were using the “combined earnings” theory to try to work around the injunction rather than allowing the case to be decided on its merits. The AP reported that a trial on whether the CFPB employees’ union can sue Vought over the layoffs was scheduled for February 2026.

Berman also described the White House’s approach as an attempt to starve the agency of funding, while the union sought to preserve the existing protections. Jennifer Bennett of Gupta Wessler LLP, which represents the CFPB employees in the case, said in response to the ruling that the court made clear that Vought could not justify abandoning the bureau’s obligations or violating a court order by manufacturing a lack of funding, according to the AP report.

The Associated Press noted that the union—National Treasury Employees Union—had mostly succeeded in court to stop mass layoffs and furloughs, after suing Vought earlier this year. The AP said the White House earlier this year issued a “reduction in force” for the CFPB that would have furloughed or laid off much of the bureau, but the injunction blocked those actions while the lawsuit proceeds.

A White House spokeswoman did not immediately respond to a request for comment on Berman’s opinion, the AP reported.