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With the Consumer Financial Protection Bureau (CFPB) facing a potential shutdown under President Trump, a nationwide coalition of attorneys-general has moved to defend the agency through the courts.
Last week, attorneys-general in 23 states put their names to an amicus brief that aims to support a legal challenge to the Trump administration’s efforts to defund the CFPB.
Led by New York Attorney General Letitia James, the brief is intended to strengthen the case presented by Brandon Scott, mayor of Baltimore, and the Baltimore City Council, who are currently suing the CFPB and its new leadership.
At the beginning of February, as covered by Vixio, then-acting CFPB director Scott Bessent issued an internal cease and desist order to the agency.
In an email to staff, Bessent ordered that all current CFPB work, including investigations, examinations, rulemakings and litigation, be suspended with immediate effect.
One week later, President Trump named Russ Vought as his new acting director of the CFPB.
Vought, a Trump loyalist who served as director of the Office of Budget Management (OMB) during Trump’s first term, has also been appointed to the same role during his second term.
On Vought’s second day as acting CFPB director, he, like Bessent, issued an order to all staff to “stand down from performing any work task”.
Vought also notified the Federal Reserve Board of Governors that he would like to request $0 in CFPB funding for the upcoming fiscal quarter.
“CFPB will not be taking its next draw of unappropriated funding because it is not ‘reasonably necessary’,” Vought said on X.
“This spigot, long contributing to CFPB's unaccountability, is now being turned off.”
Vought also acknowledged that the CFPB currently has a balance of $711m, which he described as “excessive” in the current fiscal environment.
In their lawsuit, the Baltimore plaintiffs allege that Vought’s actions are unlawful under the Administrative Procedure Act (APA), and should be reversed through a preliminary injunction.
“It is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, because it is designed to and in fact will leave the CFPB with insufficient funding to carry out its statutorily required functions,” they said.
Under the Consumer Financial Protection Act, they argue, the CFPB director is required to request transfer from the Fed of an amount “reasonably necessary to carry out [its] authorities”.
Vought has “no authority or discretion to unilaterally defund the agency”, the plaintiffs added.
States would be 'irreparably harmed' by CFPB shutdown
The state attorneys-general agree with the Baltimore lawsuit’s reading of the APA and its application of it to Vought’s actions as CFPB director.
In addition to supporting these key arguments, the 23 attorneys-general wish to substantiate the plaintiffs’ claims that states will face "irreparable harm” if the CFPB is defunded and unable to operate.
The three main areas that will be affected, the attorneys-general said, are CFPB support for state enforcement efforts, CFPB supervision of consumer protection compliance among large banks and direct CFPB collaboration in supervision and enforcement actions.
“The sudden withdrawal of these CFPB services, supervision and collaborative assistance will thus inflict immediate harm on states and their residents,” they said.
They also argue that, in many states, these harms have already begun. For example, access to the CFPB’s expertise and resources has already been lost, and referrals of consumer complaints to the CFPB have been left unanswered.
Similarly, states that were conducting collaborative enforcement investigations, active litigations or joint supervisory examinations prior to the suspension order are unable to continue their work.
It is also worth noting that, at Vought’s direction, the CFPB has set up a “tip line” where businesses can report to the agency if a CFPB staff member attempts to pursue them in violation of the suspension order.
Only the powerful will benefit from CFPB suspension, says AG James
Since the agency was launched in 2011, the CFPB has helped to protect millions of Americans from illegal behaviour by financial institutions.
In a separate statement, Attorney General James pointed to the CFPB’s track record of resolving foreclosure disputes on behalf of homeowners, preventing banks from charging junk fees and returning more than $20bn to harmed consumers.
“Eliminating the CFPB will hurt everyday people and benefit billionaires like Elon Musk and his friends,” said the attorney general.
“The CFPB has put billions of dollars back in the pockets of Americans by going after predatory lenders, deceptive companies and slashing junk fees.
“The only reason to get rid of this watchdog agency is to protect bad actors. Working families need the CFPB, especially as rising prices are making it hard to make ends meet and put food on the table.”
