We thought the Supreme Court might kill the Consumer Financial Protection Bureau (“CFPB”), but Justice Thomas saved it by accepting its funding structure as constitutional. We thought Elon Musk and DOGE would gut it, but, although they essentially accomplished that, many of the layoffs were placed on hold, then reinstated, but remain affected by ongoing legal proceedings. Now, in the latest twist, the Trump administration has found another angle to close it down: Declare that there is no money available to fund its operations.
On November 7, 2025, the Department of Justice’s Office of Legal Counsel (“OLC”) issued a memorandum concluding that the CFPB may not lawfully draw additional funds from the Federal Reserve System while the Fed operates at a net loss. The Dodd‑Frank Act authorizes CFPB funding from the “combined earnings” of the Federal Reserve. OLC now interprets that to mean profits, not gross revenues. Because the Fed has recorded losses since 2022, OLC says there are no earnings available for transfer, and that any contrary transfer could violate the Appropriations Clause and Antideficiency Act. The CFPB has filed the OLC’s memorandum with the U.S. District Court for the District of Columbia, where National Treasury Employees Union, et al. v. Russell Vought, et al. is pending. Whatever active litigation remains is being transferred to the DOJ, and the Bureau has told both courts and staff that it has sufficient funding to operate through December 31, 2025, but not after that. Absent appropriations from Congress, which is not likely, there will be mass furloughs at the end of the year.
The OLC Opinion
- What OLC was asked: Whether the CFPB can keep drawing its quarterly transfers under 12 U.S.C. § 5497(a)(1) when the Federal Reserve System is running at a loss.
- OLC’s core position: “Combined earnings” means profits (revenues minus interest expense) actually on hand, not gross revenues, not the “surplus fund,” and not future or deferred amounts. With no current profits, there are no “combined earnings” to transfer to the CFPB.
- Constitutional cautions: Ordering transfers without statutory authority would implicate the Appropriations Clause and violate the Antideficiency Act, which bars agencies from obligating or expending funds in excess of or in advance of an appropriation.
- Bottom line: Although legal challenges will certainly follow, for now the only lawful route for continued funding is a congressional appropriation; the CFPB must submit the statutory report of its funding needs to the President and appropriations committees under 12 U.S.C. § 5497(e).
- Reasoning: OLC reads “earnings” as “profits,” so if the Fed is in the red, there’s nothing to transfer. Trying to transfer anyway would breach constitutional and statutory ppropriations law.
How We Got Here: From Supreme Court Victory to yet Another Roadblock
In Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., 601 U.S. 416 (2024),the Supreme Court upheld the CFPB’s funding scheme against a facial Appropriations Clause challenge, holding Congress permissibly allowed the Bureau to draw from the Fed’s “combined earnings.” That decision did not answer what “combined earnings” means in a year when the Fed is unprofitable. The OLC, under this administration’s DOJ, gave this administration’s acting CFPB director exactly what it wanted.
Since the Fed began reporting net losses in 2022, academics and litigants floated the profits-versus-revenue reading of “combined earnings.” OLC has now embraced the profits-only interpretation, and the CFPB and DOJ have advised courts, employees, and the public of a likely funding lapse in early 2026.
Immediate Operational Fallout
- Funding runway: The CFPB says it can operate through December 31, 2025, but anticipates exhausting funds in early 2026.
- Furloughs and wind‑down: Internal communications and press reports indicate mass furloughs around December 31, 2025 if Congress does not appropriate funds, effectively pausing most CFPB activity under the Antideficiency Act.
- DOJ takeover of litigation: Although significant matters have been dismissed or diminished since January 2025, the CFPB is transferring all active litigation to DOJ; DOJ already represents the Bureau in certain appellate matters, such as the union’s challenge to workforce reductions. This raises questions about the fate of active enforcement cases and the government’s ability to pursue claims unique to the CFPB, including Unfair, Deceptive, or Abusive Acts or Practices.
Statutory Text and OLC’s Position
- Text: Section 1017 of Dodd‑Frank, codified at 12 U.S.C. § 5497(a)(1), authorizes quarterly transfers to the CFPB from the “combined earnings of the Federal Reserve System.” OLC reads “earnings” in its ordinary sense: profits after expenses, not top‑line revenue.
- Structure: OLC rejects reliance on the Federal Reserve’s surplus fund or deferred assets, reasoning those balances don’t reflect realized profits “on hand” for transfer each quarter, and that drawing on them would exceed Congress’s authorization.
- Constitutional avoidance: OLC maintains that a broader reading—allowing transfers without actual profits—would heighten Appropriations Clause problems and risk Antideficiency Act violations.
Counterpoints: This interpretation has gained traction in conservative circles in recent years, and particularly since the 2024 Supreme Court opinion. However, several judges (and even Texas AG Ken Paxton) have previously rejected the “profits-only” limitation when defendants deployed it to attack CFPB actions, reading “combined earnings” more broadly. They relied on the Supreme Court’s approval of the current funding structure, which is what the OLC memo seeks to upend.
Constitutional and Statutory Overlay: Appropriations and Antideficiency
- Appropriations Clause: OLC warns that a transfer beyond what § 5497 authorizes would be an expenditure without appropriations, contravening the Constitution’s allocation of the purse to Congress.
Article I, Section 9, Clause 7 of the Constitution provides that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
- Antideficiency Act: If funds lapse, a federal agency is prohibited from obligating or expending funds in advance of or in excess of appropriations, unless authorized by law. There are limited exceptions, but they would not cover typical CFPB supervisory or rulemaking work. 31 U.S.C. 1341 et seq.
Practical Implications for 2026
- Regulatory cadence: If the CFPB lacks the necessary funds, its agenda will stall. However, that is exactly what this administration wants, as it has already put deregulatory plans in place, rescinded previous guidance, dismissed enforcement actions, and revisited the small business lending rule (created in compliance with Section 1071 of Dodd-Frank).
- Enforcement posture: With DOJ assuming representation, expect upheaval. Some cases will undoubtedly be dismissed, while others could be reshaped in light of the administration’s more pro-business and creditor friendly posture.
- Consumer Impacts: A funding lapse would curtail core customer‑facing functions (such as consumer complaints database, supervisory exams) unless Congress appropriates funds—creating a vacuum in consumer‑finance oversight. Again, this is exactly what they want to happen.
What to Watch
- Congressional appropriations: OLC says the only lawful path is a direct appropriation. Political odds remain long, particularly given the current makeup of Congress. However, a narrowly tailored, time‑limited appropriation is the cleanest way to avoid a cessation of services.
- D.C. Circuit (NTEU v. Vought): The Plaintiff union has requested an en banc review of the August decision vacating a preliminary injunction that had prevented further layoffs. Absence of funding will just complicate this matter.
- Collateral attacks on rulemaking and enforcement: Expect creditors and other CFPB targets to test whether recent CFPB rulemaking and enforcement is even valid if the agency allegedly lacked access to lawful funding during the Fed’s loss years.
- DOJ resource allocation: DOJ announced the creation of a new Enforcement and Affirmative Litigation Branch in its Civil Division in December. Its mission is to bring affirmative litigation to enforce federal laws and regulations and to enjoin violations. It is poised to absorb pending CFPB litigation. Its commitment to consumer protection will be assessed over time.
Takeaways for Counsel and Compliance
- Plan for delays and uncertainty: Build contingencies for paused or rescheduled supervisory activity; document risk decisions made amid regulatory uncertainty.
- Manage rulemaking dependencies: Keep track of obligations under existing and proposed regulations, including whether finalization dates and/or enforcement priority has changed; continue to document everything in writing.
- Monitor enforcement transitions: If you’re party to or monitoring CFPB matters, track DOJ substitutions of counsel, motion practice, any dismissals or settlements, and pivots of the Bureau’s position in your matters.
- Watch Congress: Limited duration funding options likely exist, but whether they can compel legislation is an open matter.
