- Key Insight: The Justice Department told a federal court that an existing preliminary injunction does not require the acting director to request funding.
- What's at Stake: Acting CFPB Director Vought has said the agency will run out of money in early 2026 and all employees will be furloughed, placed on mandatory, unpaid leave.
- Forward Look: The CFPB's union asked a court to clarify whether Vought's refusal to request funding violated a March preliminary injunction that banned mass layoffs.
A federal court cannot compel the acting director of the Consumer Financial Protection Bureau to request funding the Federal Reserve System, the Department of Justice said.
In a legal filing on Monday, the Justice Department told a district court that it lacks jurisdiction to modify an existing preliminary injunction because the case is on appeal. The CFPB filed a
"Although styled as a motion for clarification, Plaintiffs appear to want an order extending well beyond the existing injunction, one that implicitly requires the CFPB to request funds from the Federal Reserve," wrote Brett A. Shumate, an assistant attorney general in the DOJ's civil division. "A clarification of the existing injunction should have no impact on whether the CFPB requests funds, which is not required by the existing injunction."
Vought
Last month, the Justice Department filed a notice with the district court and the United States Court of Appeals for the D.C. Circuit, announcing a "potential lapse in appropriations to pay the expenses of the bureau."
Vought claims that CFPB's funding will lapse and he may have to lay off staff because the DOJ's Office of Legal Counsel determined that the bureau may not legally request funds from the Federal Reserve. Last month, the OLC issued a nonbinding opinion concluding that as long as "the Federal Reserve has no profits," "it cannot transfer money to the CFPB." The Fed has been unprofitable since 2022 though some suggest it has returned to profitability recently.
The DOJ claims that the union is seeking a new order or a modification of the existing preliminary injunction. It cited the Antideficiency Act, which forbids government agencies, and employees, from spending money beyond what Congress has appropriated.
"Plaintiffs' memorandum fails to identify or discuss any language in the Court's injunction indicating that it controls how Defendants would navigate an absence of funding and their obligations under the Antideficiency Act," the response states.
The union cannot challenge "all of the individual actions to suspend or terminate CFPB's statutory mandated activities," Shumate wrote. "Instead, the D.C. Circuit instructed that, should the Bureau fail to take a discrete agency action it is statutorily required to take, Plaintiffs could at that point 'seek judicial review to "compel agency action unlawfully withheld or unreasonably delayed."'"
The DOJ claims that the injunction does not include a provision compelling Vought to request funding. And it claims that a furlough of CFPB employees is not the same as a RIF.
A RIF is a process to separate or reassign employees when positions have been abolished, whereas a furlough involves placing employees in a temporary non-duty, non-pay status because of lack of work or funds, the DOJ said
The DOJ also claims the union is unlikely to succeed on the merits of the case because a panel of the D.C. Circuit ruled in August against the union and in favor of the Trump administration, allowing Vought to fire up to 90% of the bureau's staff. That is still pending an appeal.
The dispute over the CFPB's funding boils down to whether the term "combined earnings," in Dodd-Frank refers to the Federal Reserve's profits or revenue. The CFPB and DOJ claim that the Fed's profits are calculated by subtracting its interest expenses from its revenues, which means the Fed currently is unprofitable and therefore cannot transfer money to the CFPB.
The National Treasury Employees Union and
Further, the DOJ claims that the OLC's opinion is supported by the plain meaning of earnings at the time Congress enacted Dodd-Frank and by the Fed's accounting practices.
Still, recognizing that the court could grant relief to the union, the DOJ said that it has no intention of violating a court order and that if the court sides with the union it should provide "crystal clear language … identifying with specificity precisely what the Court is requiring them to do.
"Ambiguous orders at high levels of generality are little more than invitations for Plaintiffs to later claim that Defendants are flouting judicial orders," the DOJ said.
