News - States File Lawsuits Over CFPB Funding as Federal Support Diminishes

In a landmark lawsuit, 22 attorneys general have challenged the Trump administration over its alleged failure to fund the Consumer Financial Protection Bureau (CFPB). The administration's stance hinges on the interpretation of the Federal Reserve’s earnings as non-existent profits, consequently halting funds for the CFPB. Established in 2010 after a devastating financial collapse, the CFPB was designed to shield consumers from financial malpractice and to ensure transparency within the banking sector. Its unique funding mechanism was meant to protect it from the vagaries of political influence and congressional budget debates. The lawsuit, spearheaded by New York's attorney general, argues that withholding funds circumvents Congress's mandate, infringing on separation of powers. With support from key lawmakers and former Federal Reserve officials who refute the administration's profit-focused argument, this legal battle highlights the friction between state powers and federal policy direction in safeguarding consumer rights. Amid these legal proceedings, the CFPB has already started scaling back its operations, transferring responsibilities to the Department of Justice and ceasing major investigations. Acting head of the budget office, Russell Vought, has indicated an intention to minimize the agency's reach further. The outcome of this case is pivotal, not just for the future of the CFPB, but also as a bellwether for federal regulatory agency autonomy against administrative cutbacks.