Trump CFPB shutdown faces D.C. Circuit court battle over agency funding

The Consumer Financial Protection Bureau was created by Congress in 2010 through the Dodd-Frank Act in response to the 2008 financial crisis. It oversees mortgages, credit cards, student loans, payday lenders, and debt collectors and has returned more than $17 billion to consumers since its founding. In early 2025, Acting Director Russell Vought, who also serves as Trump's budget director and was a key architect of Project 2025, issued a broad stop-work order and began mass layoffs targeting up to 1,400 of the agency's roughly 1,755 employees.

Federal employees represented by the National Treasury Employees Union sued in February 2025 to block Vought from gutting the CFPB. U.S. District Judge Amy Berman Jackson granted a preliminary injunction in March 2025, ordering the CFPB to reinstate fired workers, preserve data, and maintain operations. She wrote: There is no act of Congress that empowers the president to shut down the CFPB in his discretion. But in August 2025, a divided three-judge D.C. Circuit panel vacated the injunction. The panel majority held that the union had improperly grouped multiple CFPB leadership actions into a single claim and that the courts lacked jurisdiction to review what it characterized as ordinary workforce management.

The union pushed back hard. NTEU argued the panel created a dangerous new rule: agencies could now escape judicial review simply by avoiding a public statement memorializing their shutdown. Under the panel's logic, an agency could announce a shutdown publicly, implement it, cause immediate harm, and still be insulated from review if it was careful about paperwork. A majority of active D.C. Circuit judges voted to rehear the case en banc, meaning the full 11-judge court would review the panel decision. En banc review is rare and widely understood as a signal that most of the court disagreed with the original ruling.

A parallel funding fight played out simultaneously. Vought claimed the CFPB could not legally request its quarterly funding from the Federal Reserve because the Fed had not reported net positive earnings under his interpretation of Dodd-Frank. This was a novel legal argument. The architects of Dodd-Frank, including former Senators Chris Dodd and Barney Frank, filed an amicus brief arguing Congress designed the funding mechanism specifically to prevent exactly this kind of on-again-off-again disruption. Judge Jackson found Vought was manufacturing a funding crisis and ordered the CFPB to request $145 million from the Federal Reserve to fund operations through the second quarter of fiscal year 2026.

The full D.C. Circuit heard oral arguments on February 24, 2026. The hearing ran nearly three hours. The central question was whether the executive branch can effectively destroy a congressionally created agency through mass layoffs, funding refusals, and stop-work orders without repealing the law that created it. NTEU attorney Jennifer Bennett told the court: This is a fundamental separation of powers claim about the structure and very existence of an agency. The DOJ attorney argued the preliminary injunction was based on erroneous facts and that courts had overstepped their proper role in managing executive branch personnel decisions.

The judges appeared to struggle more with remedy than with principle. Many seemed open to some form of injunction keeping the CFPB operational while courts worked through the substantive questions. But they disagreed about what that injunction should require. Because Vought acknowledged the CFPB cannot be fully shut down, the en banc court is expected to send the case back to Judge Jackson with instructions to write a narrower injunction focused on requiring only the CFPB's statutorily required functions. A ruling is expected later in 2026 or into 2027, with legal experts anticipating a Supreme Court appeal in the 2027-2028 term.

The case goes well beyond the CFPB. If the court sides broadly with the Trump administration, future presidents could neutralize any independent agency Congress has created simply by cutting staff and refusing funding without formal legislation. The CFPB is one of several agencies already targeted. The Corporation for Public Broadcasting and the U.S. Agency for International Development have already been shut down. Consumer advocates argue that the CFPB's consumer protection function becomes most critical during economic downturns, precisely when an on-again-off-again funding mechanism would make it most vulnerable.