California, other states sue to protect federal consumer agency
California joined 20 other states and the District of Columbia on Monday in a lawsuit aimed at blocking the federal Consumer Financial Protection Bureau from being cut and shut down by the Trump administration.
The lawsuit, filed in U.S. District Court in Eugene, Oregon, accuses Acting Director Russell Vought of attempting to unlawfully withhold agency funds by unlawfully interpreting the agency’s funding code. Defendants include the agency itself and the Federal Reserve Board of Governors.
“For California, the CFPB has been an invaluable enforcement partner, working hand-in-hand with our office to protect pocketbooks and stop unfair business practices. But once again, the Trump administration is seeking to weaken and ultimately dismantle the CFPB,” California Attorney General Rob Bonta said at a news conference. 41-page legal action.
The agency did not immediately respond to a request for comment.
The agency, created by Congress in 2010 in the wake of subprime mortgage abuses that led to the financial crisis, is funded by the Federal Reserve as a way to protect itself from political pressure.
Dodd-Frank Act The statute requires the agency director to petition for reasonable funds to carry out the duties of the CFPB from the “combined earnings” of the Federal Reserve System.
Before this year, this was interpreted as the Federal Reserve’s gross income. However Opinion from the Ministry of Justice Claims that should be interpreted as meaning that the Federal Reserve has never had a profit since 2022 since it has been operating at a loss. The lawsuit claims the review was fake.
“Defendant Russell T. Vought has worked tirelessly to terminate the operations of the CFPB by any means necessary by denying Plaintiffs access to CFPB resources to which they are legally entitled. In this case, Plaintiffs challenge Defendant Vought’s most recent effort to do so,” the federal lawsuit states.
The complaint alleges that if the policy is not reversed, the agency will be cash-strapped by next month. Bonta said he and other attorneys general have not decided whether to seek a restraining order or temporary injunction to change the new funding policy.
Before the second Trump administration, the CPFB boasted: generates approximately $21 billion in returns to consumers Through nationwide enforcement, including lawsuits against Wells Fargo in San Francisco over a scandal involving the creation of accounts that were never sought after by customers.
Other major lawsuits have been filed against student loan servicer Navient for mismanaging payments and other issues, and against Toyota Motor Credit for charging higher interest rates to Black and Asian customers.
But this year the agency dropped notable cases. Los Angeles County terminated the consent decree reached with Citibank early due to allegations that it discriminated against customers with Armenian surnames.
It also dropped a lawsuit against Zelle that accused Wells Fargo, JP Morgan Chase, Bank of America and other banks of rushing to launch the payments app, causing users to lose $870 million in losses from fraud. The app denied the allegations.
Monday’s lawsuit also says the agency is critical for states to fulfill their consumer protection missions and that shutting it down would deprive them of legally guaranteed access to a database and other data operated by the CFPB that tracks millions of consumer complaints.
Vought was the lead architect of the Heritage Foundation’s Project 2025, a plan aimed at reducing the size and power of the federal bureaucracy during the second Trump administration. In February, he ordered the agency to halt nearly all of its work and has been trying to drastically downsize the agency ever since.
The lawsuit filed Monday is the latest legal effort to ensure the agency remains in operation.
A lawsuit filed in February by the National Treasury Employees Association and consumer groups accuses the Trump administration and Vought of trying to unconstitutionally dismantle the agency created by an act of Congress.
“This is waning, and it’s unfortunate that Congress has not defended the power of the purse,” Colorado Attorney General Philip Weiser said at Monday’s press conference.
“At other times Congress has vigilantly maintained its authority, but because of political polarization and fear of criticizing this President, Congress is not doing so,” he said.
