CFPB Notifies Court it Cannot Lawfully Draw Funds from the Federal Reserve

In a recent release, the CFPB states that in the ongoing lawsuit, NTEU v. Vought, the CFPB filed a Notice that the Department of Justice’s Office of Legal Counsel (OLC) has determined that the Bureau may not legally request funds at this time from the Federal Reserve under Dodd-Frank.   

This follows the Supreme Court case (Consumer Financial Protection (Bureau) v. Community Financial Services Association of America (CFSA), Case No.  22-448) in 2024, in which the Supreme Court of the United States, upheld that “Congress’ statutory authorization allowed the Bureau to draw money from the earnings of the Federal Reserve System to carry out the Bureau’s duties satisfies the Appropriations Clause.”

Per the press release, “OLC made this conclusion on the basis that the Federal Reserve System currently lacks any “combined earnings” from which the Bureau may draw funding, as required by Dodd-Frank. OLC opinions are binding upon Executive Branch agencies including the Bureau. The Bureau anticipates having sufficient funds to continue operations until at least December 31, 2025." 

More Specifics based on the Court Filing:

• Upon pulling the Notice of Filing, the Notice further states, “in light of the Office of Legal Counsel opinion, the Acting Director of the Bureau anticipates preparing a report to the President and to congressional appropriations committees, as statutorily required, identifying the “funding needs of the Bureau.” See 12 U.S.C. § 5497(e)(1)(B).
• The Bureau does not know whether and the extent to which Congress will appropriate funding to pay the expenses of the Bureau."

Exhibit A to the Notice- “Memorandum for Russell T. Vough, Acting Director Consumer Financial Protection Bureau,” written by an Assistant Attorney General,  excerpts below as it relates to the constitutionally of the funding  argument:

·        That under the Dodd Frank the CFPB was created and authorized to draw its funding from the combined earnings of the Federal Reserve System;  

·        The Federal Reserve System was profitable until 2022,  in every year since 2022, the Federal Reserve’s costs have exceeded it’s revenue;

·          The combined earnings of the Federal Reserve System refers to the Federal Reserve’s profits, calculated by subtracting its interest expenses from its revenues.  If the Federal Reserve has no profits, it cannot transfer money to the CFPB;

·        Accordingly, the only lawful source of funding is for the Bureau to request funds from Congress pursuant to the Appropriations Clause;

·        As it relates to the Supreme Court case that held that the CFPB was constitutionally funded, it points out that the Supreme Court in its opinion did not address the meaning of the term “combined earnings”. 

So, what does this mean?

• It means that it will most likely need a judicial determination on this interpretation of “combined earnings” and whether Congress will agree to fund the CFPB in an alternative manner under the Appropriations Clause.  

Link to Pleading Filed:

#01208794293 in National Treasury Employees Union v. Russell Vought (D.C. Cir., 25-5091) – CourtListener.com

Link to CFPB Filing:

CFPB Notifies Court it Cannot Lawfully Draw Funds from the Federal Reserve | Consumer Financial Protection Bureau