D.C. Circuit Grants En Banc Review in NTEU v. CFPB as Funding Battle Intensifies: What Does This Mean for Industry?
This has been an active week in the saga of the Consumer Financial Protection Bureau (“CFPB” or “Bureau”). On December 17, 2025, the U.S. Court of Appeals for the D.C. Circuit granted the plaintiffs’ petition for an en banc rehearing in NTEU v. CFPB, vacating the August 2025 panel decision (which I wrote about here and here), which had sided with Acting CFPB Director Russell Vought and would have allowed the CFPB to conduct a reduction in force (“RIF”) of most of the CFPB’s staff. This decision by the D.C. Circuit keeps the District Court’s preliminary injunction in place and gives the NTEU and other plaintiffs another chance to make their case.
Specifically, the D.C. Circuit’s order vacates the August 15, 2025 panel decision in the CFPB’s appeal of the District Court’s preliminary injunction in the case, reinstates the District Court’s preliminary injunction (as it was partially stayed by the D.C. Circuit previously, which I wrote about here and here). This move prevents, for the time being, the CFPB from conducting a planned RIF of most of the CFPB staff and other actions that would effectively sideline the CFPB. In addition, the court’s order accepts amicus briefs from the Constitutional Accountability Center, 41 nonprofit organizations, and 36 members of Congress, and sets oral argument for February 24, 2026. It is worth noting that en banc review is rare and could suggest that most of the court’s judges disagree to some extent with the panel’s decision. But even if the CFPB loses on this preliminary injunction, the District Court’s preliminary injunction does not address the other major CFPB issue that has come to the fore in recent weeks: whether the CFPB Acting Director must request funds from the Federal Reserve.
The Funding Fight
While the preliminary injunction in the NTEU v. CFPB case would prevent certain CFPB actions, including the Acting Director’s planned RIF, stop work order to staff, and termination of contracts, the preliminary injunction does not directly address the CFPB’s funding. Though the case has increasingly become a legal battle over the CFPB’s funding mechanism. This is because Acting Director Vought has put the CFPB in a situation where it will run out of funding in early 2026, requiring the CFPB to cease operations and furlough staff (which I wrote about here). First, the Acting Director did not request funds from the Federal Reserve when he came on board in February 2025. Second, he recently determined that the Federal Reserve does not have the necessary funds to transfer to the CFPB.
The Dodd-Frank Act provides that the CFPB is funded by “combined earnings of the Federal Reserve System.” The Director of the CFPB is required to determine the amount that is “reasonably necessary to carry out the authorities of the Bureau” and then the Federal Reserve is required to transfer that amount from its “combined earrings” to the CFPB. As I wrote about previously (here), on November 10, 2025, the Bureau filed a notice with the District Court explaining that the Department of Justice (“DOJ”) determined “combined earnings” means net profits (revenue from interest minus interest expenses), and since the Fed has operated at a loss since 2022, no funds are available for transfer to the CFPB. The CFPB then filed a second notice with the court on November 21, 2025, in which it stated that it sent a report to the President and Congress that is required by the Dodd-Frank Act when the Director determines that the CFPB will have insufficient funds to operate. After this second notice, the plaintiffs then motioned the District Court to clarify the CFPB’s obligations under the court’s preliminary injunction.
But the interesting thing is that, based on a new filing in court, the Federal Reserve may actually have earned a substantial profit over the past few weeks. This would mean that, even under the DOJ’s interpretation of the term “combined earnings,” there are funds available to the CFPB. On December 10, 2025, five former Federal Reserve officials—including a former Vice Chair and former general counsel of the Federal Reserve Bank of New York—filed an amicus brief in the District Court challenging the CFPB’s position on its funding on multiple grounds. They argue that the Federal Reserve does have “combined earnings” available, based on a review of the Federal Reserve’s recent balance sheets in which the “deferred asset” (essentially money the Fed owes itself) has been shrinking, which means that the Federal Reserve has been turning a profit. They also argue that OLC’s interpretation wrongly applies private-sector “profit” concepts to the central bank, and that the Federal Reserve itself disagrees with OLC’s interpretation.
These points about the CFPB’s funding were also raised in a separate lawsuit that was recently filed in the U.S. District Court for the Northern District of California: Rise Economy v. Vought. That case, filed by consumer advocacy organizations, directly challenges Acting Director Vought's interpretation of the CFPB's funding statute using many of the same arguments as made in the former Federal Reserve officials’ amicus brief in the NTEU case. In addition, the Rise plaintiffs argued that the CFPB Director is not authorized by the Dodd-Frank Act to make the determination of whether any funds are available at the Federal Reserve, and that the Director’s only statutory authority is to determine how much money the agency will need.
The Rise plaintiffs filed a motion for summary judgment, and current and former members of Congress—including Senators Chris Dodd and Barney Frank, the architects of the Dodd-Frank Act—filed an amicus brief in support of their position. They argue that Congress designed the CFPB's funding mechanism precisely to avoid the kind of funding interruption that Vought now claims is required, and that his interpretation would subject the Bureau to “on-again-off-again funding” during economic downturns when consumer protection is most needed.
Apparently in response to these latest actions, on December 16, 2025, the CFPB filed a notice with the District Court in the NTEU case indicating that the DOJ has sent a letter to the Federal Reserve asking the Federal Reserve to confirm whether it currently has “combined earnings” under the DOJ’s definition. The letter notes that “there has since been reporting that the Federal Reserve System is returning to profitability” and asks (i) whether the Fed currently has “combined earnings” as defined by DOJ, and (ii) whether the Fed anticipates having or continuing to have such earnings “in the coming weeks.” The court issued a minute order directing the CFPB to immediately file any response it receives from the Federal Reserve on the same day it is received. Stay tuned.
Some Signs of Life: CFPB Releases Annual Threshold Adjustments
Despite the uncertainty surrounding its funding, there are some signs that the CFPB continues to operate. On December 17, 2025, the Bureau issued its annual threshold adjustments for 2026, which take effect January 1, 2026. These adjustments, required by the various underlying consumer finance statutes, update various thresholds in the CFPB’s regulations for inflation. This suggests the Bureau is continuing to perform at least some of its statutory functions while the litigation regarding its future proceeds.
What This Means Going Forward
The D.C. Circuit’s decision to rehear en banc the CFPB’s appeal of the District Court’s preliminary injunction in NTEU v. CFPB ensures that the CFPB will continue to have staff, at least through the February 24, 2026 oral argument. This is because the D.C. Circuit left in place the preliminary injunction preventing Vought from implementing certain shutdown actions. But unfortunately the preliminary injunction does not address the CFPB’s funding, and the CFPB may still run out of money, furlough its staff, and cease operating. For this reason, the fight right now is about the CFPB’s funding, including what the Dodd-Frank Act phrase “combined earnings of the Federal Reserve System” means, whether the Federal Reserve has returned to profitability, and whether the CFPB Director must request funds from the Federal Reserve. The parallel litigation in the NTEU and Rise cases grapple with these questions. For the consumer finance industry, this means continued uncertainty into the new year.
We will continue to monitor both cases and keep you updated.
If you have any questions or would like to discuss any of the issues in this post, please email me at rich@garrishorn.com.
