WASHINGTON — A coalition of 22 state attorneys general have filed a federal lawsuit seeking to block the Trump administration’s effort to halt funding for the Consumer Financial Protection Bureau, calling the move unlawful and a threat to long-standing consumer protections.
The lawsuit, which was filed in U.S. District Court in Oregon, is in response to announcements by both CFPB Director Russell Vought and the White House that they will cease stop requesting funds from the Federal Reserve to fund the Bureau’s operations.
Those announcements were just the latest by the Trump administration as it attempts to all but shut down the CFPB.
Unconstitutional, AGs Say
The coalition of AGs is being led by New York Attorney General Letitia James, with the group arguing the refusal to seek funding under the Dodd-Frank Act effectively defunds the agency and violates the Constitution’s separation of powers. They contend Congress lawfully created the CFPB with a unique funding mechanism that draws from the Federal Reserve’s earnings, and the executive branch cannot nullify that statutory design by withholding funding.
“Defunding the Consumer Financial Protection Bureau will make it harder to stop predatory lenders, scammers and other bad actors from taking advantage of New Yorkers,” James said in a statement. “The administration’s actions are a handout to those who drive up costs by cheating hardworking Americans.”
The lawsuit states the funding means the CFPB is unable to perform functions that include dealing with consumer complaints and sharing data with state-level enforcement agencies and, as a result, consumers are being denied protections.
As the CU Daily has reported, since its creation nearly 20 years ago in the wake of the financial crisis the CFPB has returned almost $22 billion to consumers it said were harmed.
What the States are Asking
The states are asking the court to order the administration to resume funding requests to the Federal Reserve so the CFPB can continue operations. A parallel lawsuit by CFPB employees and unions is also pending in other courts seeking similar relief.
