Attorney General Bonta Sues Trump Administration, Demands the Continued, Lawful Funding of the CFPB

The Consumer Financial Protection Bureau was created to protect consumers from unfair, deceptive, and abusive acts or practices, and from discrimination by Big Corporations. 

OAKLAND — California Attorney General Rob Bonta co-led a coalition of 22 attorneys general in filing a lawsuit challenging the Consumer Financial Protection Bureau’s (CFPB) Acting Director’s unlawful decision not to fund the agency’s operations, preventing it from performing legally mandated functions. The lawsuit, filed in the U.S. District Court for the District of Oregon, challenges the decision by CFPB Acting Director Russell Vought to refuse to request the necessary funding for the agency from the Federal Reserve, in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The CFPB was created to protect consumers in the financial marketplace, and it performs critical functions necessary to the functioning of the financial system. For 14 years, the CFPB has served as an invaluable partner to state attorneys general and state banking regulators, as an enforcer, regulator, and resource for consumers. Shortly after taking office, the Trump Administration launched a campaign of destruction and systemic shuttering of the CFPB, threatening catastrophic harm to hardworking families and consumer financial markets nationwide. Today's lawsuit challenges the latest step in the Trump Administration campaign to shutter the agency.

“President Trump seems intent on making life more unaffordable for Americans — whether by withholding food assistance, pushing policies that would make energy more expensive, or by placing chaotic tariffs on essential items. At the same time, the Administration continues to abandon its responsibility to protect and defend American consumers being taken advantage of by Big Corporations, dismantling the agency that stands up for consumers against big banks, debt collectors, and credit reporting companies,” said Attorney General Bonta. “The Trump Administration’s latest effort to destroy the CFPB means that hundreds of thousands of consumer complaints will fall on deaf ears. If you have ever had issues with your car loan, mortgage loans, or bank fees, if you have ever disputed a credit score error and expected to have the federal government on your side, this impacts you. By refusing to fund the CFPB, even when legal and appropriate funding mechanisms are available, the Trump Administration has sharpened its message that it does not care about affordability, that it does not care to be on the side of families and working Americans. California cares. With this lawsuit, we demand that the federal government keep up its side of the deal by lawfully funding the Bureau and its critical work.”  

BACKGROUND

After the 2008 financial crisis, Congress enacted the Dodd-Frank Act, establishing the CFPB as a federal financial regulator whose first priority is protecting consumers. The CFPB is tasked with enforcing numerous federal consumer protection statutes and enacting regulations to further these efforts. 

As the cornerstone of federal consumer financial protections for 14 years, the CFPB has been an invaluable enforcement partner to California, working to protect hardworking families and make the marketplace fairer here in California and across the country, returning over $20 billion to Americans since its creation. Among other important functions, the CFPB maintains a publicly available online complaint handling system and database through which consumers can submit complaints about financial products and services and receive responses from regulated entities.   

The Trump Administration has taken a series of actions intended to debilitate the CFPB, including issuing a suspension of work across the agency, terminating probationary employees, attempting to issue reduction in force notices to 90% of the CFPB’s workforce — a move that was swiftly blocked by the courts. The continued gutting of the CFPB leaves no oversight over large, national banks and credit unions, guts oversight of payday lenders, the mortgage markets, and credit reporting agencies — and dramatically shrinks the Bureau’s supervisorial oversight of the markets for auto finance, consumer reporting, debt collection, and international money transfer services — leaving millions of consumers unprotected. 

THE LAWSUIT 

On November 10, the CFPB gave notice that it would not request funding from the Federal Reserve to continue its operations based on legal analysis it had received from U.S. DOJ advising that it could not lawfully draw funds from the Federal Reserve because the Federal Reserve is “unprofitable.” The CFPB also stated it has sufficient funds to operate until at least December 31, 2025. At that time, the CFPB is expected to imminently cease operations, including taking its online consumer complaint handling system and database offline.   

U.S. DOJ’s interpretation of the statute has been widely criticized by consumer advocates as well as former CFPB and Federal Reserve officials as being unlawful. The attorneys general argue U.S. DOJ’s advice comes from a misreading of language in the Dodd-Frank Act authorizing the CFPB to draw its funding from “the combined earnings of the Federal Reserve System.” The CFPB and U.S DOJ’s conclusion that the term “combined earnings of the Federal Reserve System” refers to the Federal Reserve’s profits, calculated by subtracting its interest expenses from its revenues, is an incorrect and unlawful interpretation.  

In the lawsuit today, the attorneys general allege that CFPB’s refusal to seek funding to continue its operations, including operating its consumer complaint database is ultra vires, contrary to law, and arbitrary and capricious as the Dodd-Frank Act clearly provides a mechanism for funding the CFPB to perform its statutorily mandatory functions — which include: 

• Rooting out unfair, deceptive, or abusive acts or practices by writing rules, supervising companies, and enforcing the law;
• Enforcing laws that outlaw discrimination in consumer finance;
• Taking consumer complaints;
• Enhancing financial education;
• Researching the consumer experience of using financial products; and
• Monitoring financial markets for new risks to consumers.  

The attorneys general argue that CFPB’s failure to seek funding for continued operations, including operations of its consumer complaints database, will harm consumers and result in the above statutorily mandated functions not being performed. The attorneys general ask the court to declare this action unlawful and ensure CFPB is properly funded.

Attorney General Bonta is leading this lawsuit along with the attorneys general of New York, Oregon, New Jersey, and Colorado. They are joined by the attorneys general of Arizona, Connecticut, Delaware, the District of Columbia, Hawai‘i, Illinois, Maine, Maryland, Massachusetts, Michigan, Nevada, New Mexico, North Carolina, Rhode Island, Vermont, and Wisconsin. 

Attorney General Bonta has been an outspoken critic amid the attempts of the Trump Administration’s CFPB to shrink its responsibilities and has submitted amicus briefs in Mayor and City Council of Baltimore v. Consumer Financial Protection Bureau and in National Treasury Employees Union v. Vought, lawsuits challenging the Trump Administration’s efforts to dismantle the CFPB.