21 Democratic-Led States Sue Trump Admin Over CFPB Funding

The CFPB was established in 2011 under President Barack Obama in the aftermath of the 2008 financial crisis to oversee consumer financial protection.

The Consumer Financial Protection Bureau in Washington on Oct. 31, 2023. Madalina Vasiliu/The Epoch Times

Attorneys general from 21 states led by Democrats and the District of Columbia filed a lawsuit against the Trump administration on Dec. 22, seeking to block its effort to defund the Consumer Financial Protection Bureau (CFPB) by withholding requests for Federal Reserve funding.

The lawsuit, filed in U.S. District Court in Oregon, argues that the administration’s position is illegal and undermines congressional intent. The states contend that without funding, the CFPB will not be able to fulfill its obligations.

“The administration’s actions are a handout to those who drive up costs by cheating hardworking Americans, and I will keep fighting to ensure they follow the law and our Constitution,” New York Attorney General Letitia James, a Democrat, said in a statement.

California Attorney General Rob Bonta said in a statement that the administration’s actions would make life more unaffordable for Americans.

“By refusing to fund the CFPB, even when legal and appropriate funding mechanisms are available, the Trump Administration has sharpened its message that it does not care about affordability, that it does not care to be on the side of families and working Americans,” Bonta said. “California cares. With this lawsuit, we demand that the federal government keep up its side of the deal by lawfully funding the Bureau and its critical work.”

The CFPB, created in 2011 under President Barack Obama after the 2008 financial crisis, regulates consumer financial protection. Unlike most agencies, it draws funds directly from the Federal Reserve’s combined earnings, going around annual congressional appropriations.

President Donald Trump has called for the dismantling of the bureau since January. Acting Director Russell Vought, who also serves as the White House budget chief, has halted most operations.

Last month, the CFPB under Vought’s leadership said it could not request more money from the Fed because the Dodd-Frank Act of 2010 requires that funding come from the central bank’s “combined earnings.”

Since the Fed had been operating at a loss since 2022, the Trump administration said no earnings were available. The CFPB, in a Nov. 10 court filing, said it expected that its funds would run out in early 2026.

Lead plaintiffs in the lawsuit include California, Colorado, New Jersey, New York, and Oregon. They argue that the defunding breaches the separation of powers because Congress designed the funding mechanism.

This lawsuit is one of many challenging the Trump administration’s CFPB approach. A federal employees union and nonprofits have filed similar legal actions in Washington and California to compel funding requests.

In March, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia granted a preliminary injunction preventing the agency’s shutdown and ordering the reinstatement of employees.

Also in March, an appeals court determined that Trump was allowed to remove two agency heads.

In an August case, an appeals court sided with Trump on his mass firing at CFPB. A May analysis suggested that such firings could escalate to Supreme Court review on executive power limits.

Recent CFPB actions under Trump include suing a Berkshire Hathaway-owned lender for predatory mortgages in January, showing that some enforcement is ongoing.

Reuters contributed to this report.