Oregon – A coalition led by Democratic attorneys general from 21 states and the District of Columbia has initiated a lawsuit against the federal government, aiming to block any efforts by the Trump administration to defund the U.S. Consumer Financial Protection Bureau (CFPB). The suit, filed Monday in federal court, argues that the administration’s refusal to request additional funding from the Federal Reserve undermines congressional authority and violates the U.S. Constitution.

The attorneys general assert that the administration’s decision to withhold financial support constitutes an unlawful act that favors entities engaging in deceptive practices, ultimately harming consumers. New York Attorney General Letitia James emphasized the significance of the CFPB, stating, “The administration’s actions are a handout to those who drive up costs by cheating hardworking Americans. I will continue to fight to ensure adherence to the law and our Constitution.”

Under the leadership of Russell Vought, the acting head of the CFPB appointed by Trump, the agency has effectively halted many of its operations as it navigates ongoing litigation regarding the dismissal of its employees. The CFPB, established following the 2008 financial crisis during Barack Obama’s presidency, is dedicated to safeguarding consumers in the financial sector, returning over $21 billion to individuals affected by improper practices.

Traditionally, the CFPB receives its funding directly from the Federal Reserve, a unique arrangement unlike other federal agencies that rely on annual appropriations from Congress. However, recent statements from Vought indicated that the bureau could not seek further funding due to the provisions of the Dodd-Frank Act, which restricts requests for financing to the Fed’s “combined earnings.” Since 2022, the Fed has reported operating at a loss, leading the Trump administration to claim that no earnings are available for disbursement.

The situation has raised alarms among the states involved in the lawsuit, as they argue that the CFPB’s inability to secure funding could hinder its legal obligations, including the management of consumer complaints. California, Colorado, New Jersey, New York, and Oregon are among the states asserting that such a funding shortage would pose a significant risk to consumer protections.

Moreover, the attorneys general contend that the administration’s actions violate the constitutional principle of separation of powers, as Congress established both the CFPB and its funding mechanisms. In tandem with this lawsuit, a federal employees’ union and multiple non-profit organizations have filed separate lawsuits in Washington, D.C., and California, seeking to compel the CFPB to resume its funding requests.

The outcome of this case could have far-reaching implications not only for consumer protection efforts but also for the structure and function of federal agencies tasked with financial oversight. As this legal battle unfolds, the future of the CFPB remains uncertain, with advocates for consumer rights watching closely to see how the courts respond to these challenges.