CFPB, Baltimore Probed Over Vought’s Threatened Funding Freeze

The Consumer Financial Protection Bureau and the city of Baltimore butted heads and faced skeptical questions from a federal judge in Maryland over whether statements from acting Director Russell Vought threatening to zero out the agency’s funding amounted to an unlawful and final agency action.

The CFPB hasn’t denied Vought’s decision to freeze the agency’s funding, counsel for Baltimore and a Maryland-based economic justice organization said at a hearing Wednesday in the US District Court for the District of Maryland. But Judge Matthew J. Maddox had sharp questions for both sides about the acting chief’s moves and the standard for judicial review under the Administrative Procedure Act.

In a Feb. 8 post on X shortly after taking over as the CFPB’s acting director, Vought said he wouldn’t request the agency’s next funding draw from the Federal Reserve, noting the bureau already had around $711 million in its reserve fund. The CFPB gets its funding through Fed transfers instead of congressional appropriations under a mechanism the US Supreme Court upheld last year.

Baltimore’s mayor and city council sued Vought and the bureau on Feb. 12, asking the court to stop the acting director from defunding the agency. The city, joined by Economic Action Maryland Fund, also sought a temporary restraining order while the case is pending. They then agreed with the CFPB to convert the request into a motion for preliminary injunction, provided the agency hold off on taking steps to defund itself until Feb. 28.

At Wednesday’s hearing, counsel for Vought and the CFPB argued Baltimore’s case had both factual and legal gaps. Baltimore’s arguments surround an alleged decision to defund the agency, but fail to offer evidence such a decision has been made, Abigail Stout of the Department of Justice’s Civil Division, acting as counsel for the agency, told the judge.

Though the complaint asserted two claims under the APA, the claims “fail on their own terms” because there was no discrete agency action to challenge, she added.

Maddox asked whether a hypothetical decision by an agency to defund itself could be challenged. Stout said it would depend because reviewable actions are narrowly defined, but added that the alleged decision from Vought wouldn’t be reviewable. “Just because plaintiffs say there’s been a decision doesn’t make it so,” she said.

Since taking over as the CFPB’s acting head, Vought has also made moves to freeze nearly all of the agency’s work, shutter its headquarters, terminate probationary employees and fellows ahead of a threatened mass layoff, and cancel over $100 million in contracts.

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

‘Sword of Damocles’

Kevin E. Friedl of Democracy Forward Foundation, arguing for the Baltimore plaintiffs, characterized the CFPB’s claims as an attempt to “nibble away at the edges” of the case instead of actually contesting that it had made a decision to defund itself.

The plaintiffs put forth enough facts they believed showed likelihood of success—the standard for a preliminary injunction—while the CFPB defendants put forward nothing to challenge the existence of a decision, Friedl said. “Something beats nothing every time,” he added.

The agency repeatedly pointed to a declaration by its chief financial officer submitted with its brief asserting that the officer had no knowledge of a mechanism to return CFPB funds to the Fed. Stout also argued the plaintiffs couldn’t demonstrate irreparable harm—a requirement for an injunction to be granted—because they conceded the agency’s consumer telephone line and complaint database were still operational.

But the judge seemed skeptical, telling Stout it wasn’t necessary to “wait for the sword of Damocles to fall” before seeking relief. Showing harm was imminent could suffice, he said.

The parties in the case at hand, as well as those in a suit brought by the CFPB union and other groups in the US District Court for the District of Columbia, had agreed to put Vought’s moves on hold for now, preventing further action to dismantle the agency. But “that’s no defense for the other side,” Friedl argued.

Maddox seemed to agree it was plausible those deals were the primary reason the agency hadn’t taken additional steps, but he said he was struggling to determine whether the plaintiffs had satisfied the burden for an injunction.

Maddox also probed Baltimore about the specifics of what it seeks to challenge. Statements by Vought and other administration officials could be taken merely as legislative proposals to dismantle the CFPB with the help of Congress, he said.

Friedl—a former senior litigator at the CFPB—pushed back, arguing the statements should be taken in context rather than viewed in isolation. “The court has to keep track of the bigger picture of what’s going on here,” he told the judge.

The case is Mayor and City Council of Baltimore v. CFPB, D. Md., No. 1:25-cv-00458, arguments held 2/26/25.