Baltimore Loses Bid to Stop Trump’s Potential CFPB Defunding (3)

A federal judge denied a request from the city of Baltimore to put a temporary stop on the Trump administration’s efforts to send the Consumer Financial Protection Bureau’s reserve funds back to the Federal Reserve or the Treasury Department.

Judge Matthew J. Maddox of the US District Court for the District of Maryland on Friday denied the request for a preliminary injunction, determining the plaintiffs failed to show CFPB leaders made a discrete and final decision to return the agency’s money.

“In short, Plaintiffs fail to show that Defendants have made or acted upon a decision to transfer away the funds presently available to it to fulfill the CFPB’s statutory mandate,” Maddox said.

“We are carefully evaluating all available options, but Mayor Brandon Scott remains unwavering in his commitment to protecting vital assistance for Baltimore residents who have been harmed by corporate wrongdoing,” Kamau Marshall, the chief spokesperson for Scott (D), said in a statement.

The plaintiffs have said they rely on CFPB consumer complaint data to protect their citizens and carry out other functions.

“His administration will continue to advocate for justice and ensure that those affected receive the support they deserve,” Marshall said.

The CFPB didn’t immediately respond to a request for comment.

Among Russell Vought’s first actions after taking over as the CFPB’s acting chief on Feb. 7 was to announce the agency would request $0 from the Fed in its next funding draw.

Baltimore’s mayor and city council and Economic Action Maryland Fund sued the CFPB several days later, alleging Vought intended to defund the agency. Republicans have long argued the CFPB’s funding mechanism—through Fed transfers outside of congressional appropriations—makes it less accountable, but the US Supreme Court upheld the arrangement in a ruling last year.

At a hearing last month, lawyers arguing for the CFPB said the agency hadn’t taken official action to defund itself. But a Feb. 11 email from CFPB Chief Operating Officer Adam Martinez said the agency had reached out to the Fed to see how it could return money, according to an exhibit submitted in separate litigation challenging Vought’s moves and subsequently filed by the Baltimore plaintiffs.

Internal emails showed the CFPB couldn’t find a mechanism to return the reserve funds, Maddox noted in his ruling.

Baltimore argued those emails were a “red herring,” pointing to other evidence the CFPB could move the money.

But Vought determined the nearly $711.6 million in CFPB funds as of Jan. 31 was enough to carry out his plans for a more “streamlined” agency, he said in a Feb. 8 letter to the Fed. That included more than $412 million in unobligated funds that could be used to operate a smaller bureau, with $220 million set aside for reserve funds and $192.3 million left over as an operating balance.

That was enough for Maddox to conclude the CFPB could spend down its reserve funds to maintain legally mandated operations rather than transfer the money out to prevent those operations.

“For the Court to intervene and entangle itself in the Bureau’s administrative processes before the agency has made any final decision about the disposition of its operating and reserve funds—and without clear indication that an unlawful and injurious decision will be made imminently—would exceed the bounds of the Court’s proper role and jurisdiction,” he wrote.

Jonathan McKernan, President Donald Trump’s nominee for full-time CFPB director, said at a Feb. 27 confirmation hearing that he intends to “right-size” the agency. Probed by Democrats on the Senate Banking Committee, McKernan acknowledged the CFPB “will need funding to perform our statutory responsibilities.”

The committee voted on a party-line basis March 6 to advance his nomination to the full Senate.

The CFPB funding issue also came up in litigation launched by the National Treasury Employees Union, which represents many CFPB employees, and other plaintiffs in the US District Court for the District of Columbia.

That case has a much broader scope, with the NTEU and its co-plaintiffs challenging the firing of probationary employees and those with time-specific contract terms, the cancellation of contracts, and whether the CFPB is actually carrying out legally mandated functions.

Judge Amy Berman Jackson said she was “leaning” toward a preliminary injunction at a March 11 hearing in that case.

The Democracy Forward Foundation represents Baltimore and its co-plaintiffs.

The case is Mayor and City Council of Balt. v. CFPB, D. Md., No. 1:25-cv-00458, Memorandum 3/14/25.