Federal Judge Blocks Trump Administration’s Attempt to Defund CFPB, Citing Vought’s Own Words and Flawed Legal Theory

In a sharp rebuke to the Trump administration’s ongoing efforts to dismantle a key consumer watchdog agency, U.S. District Judge Amy Berman Jackson ruled on December 30, 2025, that the Consumer Financial Protection Bureau (CFPB) must continue receiving funding from the Federal Reserve.

The decision directly confronts Acting CFPB Director Russell Vought’s reliance on a controversial Department of Justice Office of Legal Counsel (OLC) memo, which claimed the Fed’s current operating losses eliminate available “combined earnings” for the bureau.

Jackson described this interpretation as a “manufactured” crisis designed to “starve” the agency, effectively achieving through the back door what courts have blocked upfront. This ruling not only preserves the CFPB’s operations for now but shows broader tensions over executive power, congressional intent, and the independence of financial regulators in a polarized political landscape.

The CFPB: A Post-Crisis Watchdog Under Siege

Established by the Dodd-Frank Act in 2010 following the 2008 financial meltdown, the CFPB was designed to protect consumers from predatory lending, deceptive practices, and financial abuses. Unlike most agencies, it draws funding from the Federal Reserve rather than annual congressional appropriations—a structure intended to insulate it from political pressure.

Over its history, the bureau has returned more than $21 billion to consumers victimized by banks and financial firms, enforcing rules on everything from credit cards and mortgages to student loans and overdraft fees.

Yet, the CFPB has long been a target for conservatives, who argue it overreaches and burdens businesses. Project 2025, the Heritage Foundation’s blueprint for a second Trump term—co-authored in part by Vought—explicitly calls for abolishing or severely curtailing the agency.

Since taking office in 2025, the Trump administration has pursued aggressive dismantling: mass staff reductions, halted enforcement actions, and now, a funding cutoff. These moves align with campaign promises but clash with statutory mandates, sparking lawsuits and judicial interventions.

Russell Vought – Architect of Change and Dual-Role Controversies

At the heart of this battle is Russell “Russ” Vought, a veteran of Trump’s first term and a prominent conservative thinker. As Director of the Office of Management and Budget (OMB), Vought wields influence over federal spending.

Simultaneously serving as acting CFPB director—and previously acting head of USAID—he embodies the administration’s strategy of placing loyalists in key positions.

Vought’s public statements have been candid: In an October 2025 appearance on “The Charlie Kirk Show”—just a month after the tragic assassination of host Charlie Kirk at Utah Valley University—Vought declared, “We don’t have anyone working there except our Republican appointees and a few career [employees]… We want to put it out – and we will be successful probably within the next two, three months.”

Judge Jackson seized on these remarks, opening her opinion with the quote and warning it would be “foolhardy” to ignore Vought’s intent. This transparency, while politically bold, provided plaintiffs with powerful evidence of motive, highlighting how personal admissions can undermine legal defenses in court.

The Legal Battle –From Mass Layoffs to Funding Freeze

The saga began in February 2025 when Vought initiated sweeping changes, including attempts to fire up to 90% of CFPB staff and cancel contracts. The National Treasury Employees Union (NTEU), representing bureau workers, sued promptly, securing preliminary injunctions from Jackson that halted mass terminations and preserved operations.

Appeals followed, with mixed results: A D.C. Circuit panel briefly vacated one injunction, but the full court later reinstated protections via en banc review.

Amid this, Vought filed a November notice citing the OLC memo, arguing the Fed’s losses since 2022—due to higher interest expenses from anti-inflation rate hikes—meant no “earnings” for CFPB transfers. This would deplete remaining funds by early 2026, effectively shuttering the agency without congressional action.

Plaintiffs sought clarification that refusing Fed requests violated existing injunctions. Jackson agreed emphatically, calling the OLC opinion a “sharp departure” from longstanding practice (the Fed had funded CFPB consistently despite losses) and inconsistent with Dodd-Frank’s text and intent.

Jackson’s 32-page ruling dissects the administration’s strategy. She notes nothing in the statute, injunction, or Fed’s practices changed—only the executive’s interpretation did, aimed at unilateral elimination of a congressionally created agency.

This raises profound separation-of-powers issues: Can a president “starve” an independent bureau via novel legal theories while litigation pends?

Experts view this as part of a broader pattern. The administration’s actions mirror Project 2025 recommendations but test constitutional limits upheld in cases like Seila Law (2020), which affirmed CFPB structure while allowing director removability. By rejecting the OLC memo, Jackson reinforces that executive reinterpretations can’t override clear statutory funding mechanisms.

Psychologically and politically, Vought’s approach reflects ideological commitment over pragmatic governance. His dual roles amplify conflicts of interest, as OMB oversees budgets while he directs the targeted agency.

Praise and Partisan Divide

Reactions were swift. Senator Elizabeth Warren, who conceived the CFPB, hailed the ruling: “Courts will keep blocking Russ Vought’s illegal attempts to ‘close down’ the agency.” Consumer advocates celebrated a lifeline for millions relying on CFPB protections.

Industry groups and conservatives, however, decried judicial overreach, arguing the bureau’s independence enables unaccountable regulation.

Media coverage spanned outlets like The New York Times, CNN, and The Guardian, emphasizing consumer impacts amid economic uncertainty. Social media amplified debates, with #SaveCFPB trending alongside critiques of “deep state” agencies.

This decision buys time—a trial on merits is slated for February 2026—but the CFPB remains vulnerable. Ongoing appeals, potential congressional cuts (a 2025 cap reduced funding), and industry challenges have already rolled back rules on medical debt, overdrafts, and more.

For consumers, the stakes are high: Without robust oversight, predatory practices could resurgence, disproportionately harming vulnerable groups. Economically, a weakened CFPB might boost short-term business profits but risk long-term stability, echoing pre-2008 laxity.

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Politically, it highlights executive-congressional friction. If upheld, the ruling sets precedent against administrative sabotage of disliked laws. Conversely, reversal could embolden similar tactics elsewhere.

With funds secured temporarily, CFPB can pay staff and maintain core functions. Yet Vought’s determination—and administration appeals—suggest protracted battles. States have sued separately, and public pressure mounts.

Ultimately, this case transcends one agency: It’s about democratic checks, consumer rights, and whether executive whims can undo legislative safeguards. As Jackson warned, allowing such maneuvers would let presidents nullify Congress “with the stroke of a pen.”

Stay tuned as this unfolds—it’s a defining moment for financial regulation in America.