CFPB Surprisingly Appeals Judge Davila’s Funding Decision to the Ninth Circuit
Just when the conventional wisdom seemed to be that the CFPB was no longer going to assert that it could not request funding from the Federal Reserve because of combined losses at the Federal Reserve Banks, things have once again been thrown into a cocked hat. On May 11, 2026, the CFPB filed a notice of appeal to the U.S. Court of Appeals for the Ninth Circuit seeking review of U.S. District Judge Edward Davila’s March 13, 2026 decision holding that the Bureau must continue requesting funding from the Federal Reserve.
As previously discussed in our blog, Judge Davila ruled that Acting Director Russell Vought acted unlawfully when he concluded that the CFPB could no longer request transfers from the Federal Reserve because the Federal Reserve System allegedly lacked “combined earnings” within the meaning of Section 1017 of the Consumer Financial Protection Act. Judge Davila held that “combined earnings” means combined revenues (and not combined profits) of the Federal Reserve Banks.
The lawsuit was brought by Rise Economy, the National Community Reinvestment Coalition, and the Woodstock Institute. Judge Davila granted summary judgment in favor of the plaintiffs and held that the CFPB’s interpretation of “combined earnings” was arbitrary, capricious, and contrary to law under the Administrative Procedure Act. He ordered the CFPB to continue requesting from the Federal Reserve the funds “reasonably necessary” to carry out its statutory responsibilities. Judge Davila imposed no limit on the duration of the order
Judge Davila’s opinion was strongly worded. Among other things, he concluded that the CFPB’s position would undermine Congress’s intent to create an agency insulated from the annual appropriations process and would subject the Bureau to “intermittent defunding” based on fluctuations in the Federal Reserve’s balance sheet.
The appeal sets up yet another significant appellate battle over the CFPB’s structure and funding mechanism. Although the Supreme Court upheld the CFPB’s funding structure in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., the Davila litigation presents a different issue — namely, whether the CFPB may refuse to seek funding from the Federal Reserve based on the Federal Reserve System’s combined operating losses.
The Ninth Circuit appeal also comes against the backdrop of separate litigation still pending in the D.C. federal courts involving the CFPB’s staffing reductions and funding issues. Judge Amy Berman Jackson previously rejected a similar CFPB argument concerning the Bureau’s authority to stop requesting Federal Reserve funding. The CFPB never appealed Judge Jackson’s order requiring the CFPB to request funding from the Federal Reserve and the CFPB seemed to throw in the towel on the funding question when Acting Director Vought requested funding for the second quarter of the Government’s fiscal year.
It will be interesting to see whether the CFPB aggressively pursues the appeal or whether the filing of the notice of appeal was primarily intended to preserve appellate rights while the Bureau evaluates its longer-term litigation strategy. As stated above, the CFPB already has been complying with court orders directing it to request Federal Reserve funding.
Until the CFPB files its opening brief in the Ninth Circuit, we don’t know whether the CFPB is directly appealing Judge Avila’s reasoning that “combined earnings” means combined revenues or whether the CFPB is limiting its appeal to the indefinite duration of the order.
The Ninth Circuit’s eventual decision could have major implications not only for the CFPB’s operational independence, but also for the broader question of how much discretion an agency head has to effectively suspend agency operations through funding decisions notwithstanding Congress’s statutory directives.