On September 25, 2026, the U.S. District Court for the District of Oregon granted partial summary judgment to a coalition of twenty-two states and the District of Columbia in State of New York v. Vought, No. 6:25-cv-02384-AA (D. Or.), holding that CFPB’s Acting Director Vought unlawfully refused to request funding from the Federal Reserve, violating both the Administrative Procedure Act and the Constitution’s separation of powers. It is the third federal district court ruling to reject the Office of Legal Counsel’s (OLC) reading of the CFPB’s funding statute — and the first to do so on Constitution grounds.
The CFPB does not rely on annual congressional appropriations. Under 12 U.S.C. § 5497, it draws funding from the Federal Reserve System’s “combined earnings,” subject to statutory caps. In November 2025, the OLC concluded that “combined earnings” means profits — what remains after expenses — not gross revenue. Because the Fed was then running a net loss as elevated interest rates pushed its expenses above income, Mr. Vought reasoned no funds were legally available and declined to request any for fiscal year 2026, describing the amount he could request as “$0.”
The twenty-two states — including New York, Oregon, New Jersey, Colorado, and California — and the District of Columbia sued in December 2025. Mr. Vought and the CFPB argued the dispute was moot because the U.S. District Court for the District of Columbia in National Treasury Employees Union v. Vought, 816 F. Supp3d 1 (D.D.C. 2025) had already held “combined earnings” means all revenue earned and ordered continued funding requests, and the Fed had returned to profitability. The court rejected that argument, holding that the government bears the burden of showing a live case went moot — and that a § 5497 obligation does not dissolve because another court compelled one quarter’s compliance.
Following oral argument in this case, the Northern District of California issued its decision in Rise Economy v. Vought, 823 F. Supp.3d 1013 (N.D. Cal. 2026), finding that the CFPB and Vought had acted arbitrarily and capriciously and so violated the APA by relying on the OLC Memo’s interpretation of 12 U.S.C. § 5497 and refusing to request funding from the Federal Reserve. The CFPB Director was ordered to continue to request funding necessary to carry out the authorities of the CFPB from the Federal Reserve, “consistent with their obligations under § 5497.”
Despite the decisions in National Treasury Employees Union and Rise, the court concluded that the case was not rendered moot because the decisions in National Treasury Employees Union and Rise are both on appeal to the D.C. Circuit and Ninth Circuit respectively, so a live controversy remains.
As in National Treasury Employees Union and Rise, the court held that “combined earnings” refers to the Fed’s gross revenues before expenses, looking to the plain meaning of “earnings” across multiple dictionary definitions, and Congress’s intent to give the CFPB a stable funding stream insulated from appropriations. The court also found the Director must request from the Federal Reserve what he determines is reasonably necessary for the CFPB’s responsibilities.
The court next went further than the holdings in National Treasury Employees Union and Rise, finding that Mr. Vought’s refusal to request Federal Reserve funding also violated the separation of powers provision of the Constitution. Reasoning that by refusing to use the funding mechanism designed by Congress to provide the CFPB with a source of funding outside the ordinary appropriations process based on an erroneous interpretation of the statute that Mr. Vought had effectively prevented the CFPB from obtaining funds that Congress had authorized, the court 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 vacated the challenged decisions and granted declaratory relief, but declined to enjoin FY2026 funding because that year was nearly over.
Three district courts have now rejected the OLC’s interpretation of the CFPB funding statute, each holding that “combined earnings” means Federal Reserve revenue, not profit. Goodwin will continue to monitor these cases as they are heard on appeal, and will similarly monitor developments of the Consumer Financial Protection Accountability and Reform Act of 2026, which was recently voted out of the House Financial Services Committee and would eliminate the CFPB’s funding structure through the Federal Reserve earnings and subjected to the regular Congressional appropriations process.