A federal district court in the Northern District of California has granted summary judgment to the plaintiffs in Rise Economy et al. v. Vought et al., permanently enjoining the Consumer Financial Protection Bureau (CFPB) from relying on a Department of Justice Office of Legal Counsel (OLC) opinion that sought to narrow the statutory definition of “combined earnings” used to fund the CFPB. The decision represents a significant judicial rejection of efforts to restrict the CFPB’s access to Federal Reserve funding.
Background
Congress established the CFPB through the Dodd-Frank Act and deliberately designed its funding structure to operate outside the annual congressional appropriations process. Under 12 U.S.C. § 5497, the CFPB Director may request transfers from the Federal Reserve System in amounts the Director determines are “reasonably necessary” to carry out the Bureau’s authorities, subject to a statutory cap tied to a percentage of the Federal Reserve’s total operating expenses. This mechanism has served as the CFPB’s primary funding source since its creation in 2010.
The OLC Opinion and Defendants’ Response
In 2025, the OLC issued an opinion concluding that “combined earnings” in § 5497 means the Federal Reserve’s profits—revenues after expenses—and that because the Federal Reserve had recently reported negative net income, no funds could legally be transferred to the CFPB. Acting Director Russell Vought adopted that interpretation, declined to request funding from the Federal Reserve, and instead submitted a request directly to Congress under § 5497(e), with no assurance that Congress would approve it.
Consumer advocacy organizations Rise Economy and the National Community Reinvestment Coalition challenged the decision in federal court, arguing that the refusal to request Federal Reserve funding violated the Administrative Procedure Act and Dodd-Frank’s statutory funding structure.
The Court’s Analysis
The court rejected the OLC’s interpretation on multiple grounds.
First, the court held that § 5497 imposes an affirmative duty on the CFPB Director both to determine the funding reasonably necessary for Bureau operations and to request that funding from the Federal Reserve—a duty every Director prior to Vought had recognized and fulfilled.
Second, the court found that the CFPB Director has no authority to define or calculate the Federal Reserve’s “combined earnings” in the first instance. The court noted that there is no basis for the head of a different agency—without financial authority over or specialized expertise in the Federal Reserve System—to dictate how the Federal Reserve defines and calculates that figure. The court concluded that this was a fatal gap in Defendants’ position.
Third, on the definition itself, the court rejected the OLC’s “profits” reading, finding that standard private-sector financial definitions are inapplicable given the Federal Reserve’s unique public function as the nation’s central bank. The court concluded that the ordinary meaning of “earnings” in this context is best understood as revenue, not net profits—a reading reinforced by the fact that Congress consistently uses the term “net earnings” when it intends to refer to profits after expenses, and notably did not do so here.
Finally, the court found that the legislative history of the Dodd-Frank Act strongly supported the plaintiffs’ position. Congress intentionally created an appropriations-independent funding stream for the CFPB, and the OLC’s interpretation would effectively subject the Bureau to intermittent defunding based on unpredictable fluctuations in the Federal Reserve’s balance sheet—precisely the outcome Congress designed § 5497 to prevent.
The Permanent Injunction
The court concluded that Defendants acted arbitrarily, capriciously, and contrary to law by adopting the OLC’s interpretation and refusing to request Federal Reserve funding on that basis. The court declared Defendants’ reliance on the OLC opinion unlawful and ordered them to continue requesting from the Federal Reserve the amount the Director determines to be reasonably necessary to carry out the CFPB’s statutory authorities.
The ruling preserves the funding independence Congress built into the Dodd-Frank Act and signals strong judicial skepticism toward executive branch interpretations that would achieve through statutory construction what cannot be accomplished through legislation.
Next Steps
The CFPB has until May 12, 2026 to file an appeal of the decision. As of March 19, 2026, the CFPB has not issued any statement or public comment indicating whether it intends to appeal.
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