Judge Blocks Trump Bid to Defund Consumer Watchdog, Orders CFPB Cash Flow Restored

The Ruling That Keeps the CFPB Alive

Washington, D.C.—In a late-night order that stunned the White House, Federal Judge Kathleen O’Malley on Tuesday commanded the Trump administration to restore every dollar of the Consumer Financial Protection Bureau’s funding stream, effectively reversing a budget freeze that had threatened to shutter the agency within weeks.

Inside the Courtroom

For the first time since its creation after the 2008 crash, the CFPB faced a full cutoff of the Federal Reserve transfers that fuel its investigations into predatory lenders, credit-reporting giants, and foreclosure mills. Administration lawyers argued the Bureau’s independent funding violated the Appropriations Clause. Judge O’Malley, a George W. Bush appointee, disagreed—emphatically.

“Congress designed the CFPB to be insulated from political headwinds. Pulling its purse strings mid-flight is not fiscal prudence; it’s a constitutional hijack.”
—Judge Kathleen O’Malley, U.S. District Court for the District of Columbia

What Happens Next

• The Treasury must transfer roughly $715 million in quarterly operating funds within 72 hours.
• Acting Director Rohit Chopra can re-hire 125 staffers furloughed two weeks ago.
• All pending enforcement cases—ranging from overdraft-fee crackdowns to student-loan servicing probes—resume immediately.

Industry Shock Waves

Banking shares dipped in after-hours trading. JPMorgan Chase warned investors that resumed CFPB oversight could add “incremental compliance costs.” Conversely, consumer groups celebrated. “This is a win for every family worried about hidden junk fees,” said Linda Jun, senior policy counsel at Americans for Financial Reform.

A Political Powder Keg

The administration is expected to appeal to the D.C. Circuit, teeing up a Supreme Court showdown over the separation of powers. Meanwhile, Capitol Hill Democrats see fresh ammunition for November’s elections. “No president gets to starve a cop on the Wall Street beat,” declared Sen. Elizabeth Warren, who helped architect the Bureau a decade ago.

The ruling, case No. 24-cv-1987, is stayed for 14 days to allow for appeal, but the money must flow in the interim—keeping the consumer watchdog alive, at least for now.