- A Nov. 2025 OLC opinion says Dodd-Frank lets the CFPB draw only from the Fed’s “combined earnings,” and because the Fed has had net losses since 2022 it has no usable profits to transfer without a congressional appropriation.
- Judge Amy Berman Jackson ruled in NTEU v. Vought (Dec. 30, 2025) that “combined earnings” means the Fed’s gross receipts, so CFPB funding may continue even during loss periods.
- The dispute leaves CFPB operations vulnerable as reserves may run out in early 2026 absent legislative action, and it adds uncertainty for CFPB rulemaking, supervision, and enforcement.
- Although the Supreme Court upheld the CFPB’s funding structure in 2024, it did not decide whether Fed loss periods eliminate “earnings” under 12 U.S.C. § 5497(a)(1).
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The Dodd-Frank Act vests in the CFPB a funding mechanism via “combined earnings of the Federal Reserve System” under 12 U.S.C. § 5497(a)(1), with no annual Congressional appropriations. The legislative scheme requires that the Fed transfer to the CFPB the amount the Director deems “reasonably necessary.” However, that statute is constrained by an annual cap tied to operating expenses of the Fed and other specified limits.
The core legal tension arises from competing interpretations of “combined earnings.” The OLC’s legal opinion asserts that “combined earnings” means net profits (revenues minus expenses), hence no earnings exist while the Fed operates at a loss, blocking further transfers. In contrast, Judge Jackson’s decision finds “combined earnings” to include all revenues, irrespective of net profitability, permitting transfers even during loss periods. [Primary][Primary]
Judge Jackson’s interpretation is strongly contested. Critics point out that the language “earnings” in financial and accounting contexts typically refers to net amounts after accounting expenses; legislative history and structure may support this narrower reading. The OLC’s view also emphasizes constitutional constraints under the Appropriations Clause, which mandates that public funds must be appropriated by Congress. That argument is bolstered by statutory safeguards (e.g., § 5497(e)(1)(A-B)) providing for direct appropriation when sums from the Fed are “not sufficient.”
Judge Jackson’s ruling is significant, though it may be appealed or reversed. Notably, the Supreme Court in May 2024 in CFPB v. Community Financial Services Association upheld the CFPB’s unique funding structure against other constitutional challenges, finding the scheme valid under the Appropriations Clause. But that case did not expressly resolve the question of whether a loss-period nullifies available “earnings” under § 5497(a)(1).
The timing is urgent: CFPB and DOJ filings estimate existing reserves suffice only through December 31, 2025, and without congressional appropriation, CFPB could run out of funds in early 2026, risking shutdown of most regulatory, supervisory, enforcement, and policy initiatives.
Strategic implications for stakeholders include:
- Regulated firms may face uncertainty around upcoming rulemaking, enforcement, compliance (especially for open banking, small business data collection under Sections 1033, 1071, etc.).
- Litigants may challenge prior CFPB actions where funding was drawn during loss periods.
- Congress may become pressured to act: either clarify the meaning of “combined earnings,” provide direct appropriations, or amend § 5497 to resolve ambiguities and constitutional concerns.
- The appropriations doctrine and oversight of independent agencies’ budgets could see increased judicial scrutiny in other contexts.
Open questions:
- What is the precise financial condition of the Federal Reserve: its accounting losses, deferred assets, whether there remain positive revenues or other funds beyond interest income.
- Will higher courts (D.C. Circuit, Supreme Court) weigh in to resolve the conflict between Judge Jackson’s decision and the OLC’s opinion?
- If CFPB must rely on direct congressional appropriations, will Congress respond, and how will that affect the Bureau’s independence?
- What is the fate of CFPB regulations already issued or under development during this ambiguous funding period?
Supporting Notes
- The OLC opinion from Nov. 7, 2025 interprets “combined earnings” to mean profits, so that since the Fed has reported net interest losses since 2022, there are no earnings available under § 5497(a)(1).
- The same opinion warns that requiring transfers absent earnings could violate the Appropriations Clause and possibly the Oath or Affirmation Clause.
- Judge Amy Berman Jackson’s decision in NTEU v. Vought (Dec. 30, 2025) holds that “combined earnings” allows funding even when the Fed is operating at a combined loss; she rejects the OLC’s narrower interpretation. [Primary]
- The CFPB and DOJ state current reserves will sustain operations “through at least December 31, 2025,” but absent congressional action there may be a lapse in early 2026.
- Congress requirement under § 5497(e)(1)(A) allows the Director to seek appropriations if sums from the Fed are not sufficient to carry out the bureau’s authorities.
- The Supreme Court in CFPB v. Community Financial Services Association (May 16, 2024) upheld the constitutionality of the CFPB’s funding mechanism under the Appropriations Clause, though without resolving loss-period funding issues.