Twenty-three state attorneys general have joined a lawsuit fighting the shutdown of the CFPB.
In an amicus brief filed last week, the states argue that closing the Consumer Financial Protection Bureau (CFPB) would harm consumers and make consumer protection laws harder to enforce.
“Eliminating the CFPB will hurt everyday people and benefit billionaires like Elon Musk and his friends,” New York Attorney General James Letitia James said in a news release announcing the filing. “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.”
The filing follows a move by the Trump administration earlier this month that essentially froze the CFPB’s enforcement activity.
Russell Vought, the regulator’s acting director, has also said he would halt the CFPB’s funding, informing the Federal Reserve that the bureau would not take its next draw of appropriated funding because it wasn’t necessary to fulfill its duties.
Vought earlier this month agreed during a court conference to postpone a planned mass firing of agency staff amid the suit challenging the White House effort to dismantle the regulator.
The agreement bars the CFPB from firing employees for reasons not related to their work performance or conduct, and also blocks the Trump administration from trying to shift funding away from the consumer protection agency.
U.S. District Judge Amy Berman Jackson said she will weigh issuing a longer-term preliminary injunction at a hearing on March 3. The ruling came after the CFPB fired its probationary workers as part of the Trump administration’s wide-ranging layoffs of government employees.
Unions representing the workers and suing the administration alleged in a court filing that Vought was aiming to fire more than 95% of CFPB staff.
In their amicus brief, the attorneys general argue that efforts to shut down the CFPB or curtail its authority could keep consumers from reporting fraud, while also “significantly” reducing oversight of big banks.
“The attorneys general warn that this may lead to financial institutions loosening their regulatory compliance, as was seen in the years leading up to the financial crisis,” the release added.
Meanwhile, PYMNTS wrote earlier this month that if the CFPB’s rulemaking is dead and existing rules could be curtailed, “the sweeping moves would presumably include the October issuance of the final rule that would shape how personal financial data is handled, and by extension, how open banking evolves.”
