21 States Sue Trump Administration, Alleging Illegal Defunding of CFPB

Twenty-one states and the District of Columbia sued the Trump administration Monday (Dec. 22), aiming to stop what they said is illegal defunding of the Consumer Financial Protection Bureau (CFPB).

In their complaint, the attorneys general allege that CFPB Acting Director Russell Vought is attempting to completely defund the agency by refusing to request funding from the Federal Reserve; that the CFPB has a legal requirement to collect consumer complaints, process them and share the data with the states; and that Vought’s actions violate the law and the Constitution, according to a Monday press release from the Office of the New York State Attorney General.

The lawsuit seeks a court order halting the complete defunding of the CFPB, according to the release.

“My Office and attorneys general across the country rely on the CFPB for consumer complaints and other data to get justice for consumers,” New York Attorney General Letitia James said in the release. “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.”

The CFPB did not immediately reply to PYMNTS’ request for comment.

The regulator announced in November that it is legally prohibited from drawing additional funds from the Federal Reserve to continue its operations and that it expected its current funding to last through the end of 2025.

A legal opinion from the Department of Justice’s Office of Legal Counsel (OLC) concluded that because the Federal Reserve was not currently reporting “combined earnings,” as defined under the Dodd-Frank Act (the statute that created the CFPB), the agency couldn’t lawfully access funds from the Federal Reserve.

Unlike most other federal government agencies, the CFPB doesn’t rely on annual appropriations from Congress. Instead, it receives its funding directly from the Federal Reserve.

The Trump administration faces multiple legal challenges over efforts to curtail or dismantle the CFPB. These challenges include litigation involving a CFPB labor union and consumer advocacy groups, which argue that President Donald Trump lacks the authority to fire most of the bureau’s staff or dissolve the agency entirely.