A coalition comprising 21 U.S. states and the District of Columbia initiated legal action against the Trump administration on Monday. The lawsuit aims to prevent the defunding of the Consumer Financial Protection Bureau (CFPB), an agency that has indicated it expects to exhaust its operational funds within weeks.
Funding Dispute Details
The CFPB's operational funding is typically sourced from the Federal Reserve, a mechanism established to provide the agency with a degree of autonomy from political influence. However, under Acting Director Russell Vought, the CFPB has declined to accept allocated funds from the Federal Reserve.
The CFPB contends that its establishing legislation mandates funding from the Fed's "combined earnings." The Trump administration argues that the Federal Reserve currently lacks such earnings, having operated at a loss.
The attorneys general leading the lawsuit, alongside some Democratic lawmakers, challenge this interpretation. They assert that the CFPB's definition of "combined earnings" as only "profits" is too narrow, proposing that lawmakers intended the term to encompass the Federal Reserve's broader "revenues" or total proceeds.
Lawsuit Arguments
The lawsuit, filed in the U.S. District Court in Oregon, argues that Vought and the CFPB are applying an "unreasonable and unlawful interpretation of 'combined earnings.'" The states contend that the agency's current stance could lead to a complete loss of its funding as early as January 2026, which they argue would negatively impact their residents.
New York Attorney General Letitia James, leading the coalition, stated that the CFPB is legally obligated to "collect and process consumer complaints and share that complaint data with states," a function that would be impaired without funding. James emphasized that state attorneys general rely on CFPB data to address consumer issues, noting that defunding the agency would hinder efforts against "predatory lenders, scammers, and other bad actors."
Prior Actions and Criticisms
Throughout the Trump administration, the CFPB experienced organizational shifts and staffing disputes. Attempts by the administration to dismiss some CFPB staff members were subsequently blocked by judicial rulings.
Since its establishment following the 2008 financial crisis, the CFPB has been a subject of criticism from some conservatives. These critics argue that the agency's enforcement actions are overly aggressive and that it lacks sufficient accountability to Congress.