Twenty-three state attorneys general have joined a lawsuit to challenge the shutdown of the CFPB. On Feb. 20, New York Attorney General Letitia James co-led a coalition of 23 attorneys general to warn against efforts by the Trump administration to defund and disband the Consumer Financial Protection Bureau (CFPB).
In the amicus brief, filed last week in the U.S. District Court for the District of Maryland, the states argue that dismantling the CFPB would harm consumers and make consumer protection laws harder to enforce. The coalition of states that support the plaintiffs’ motion for a preliminary injunction include: New York, New Jersey, the District of Columbia, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.
“Eliminating the CFPB will hurt everyday people and benefit billionaires like Elon Musk and his friends,” New York Attorney General James claimed in a news release announcing the filing. “The CFPB has put billions of dollars back in the pockets of Americans by going after predatory lenders, deceptive companies, and slashing junk fees. The only reason to get rid of this watchdog agency is to protect bad actors.”
CFPB unions suing the administration claim that Acting Director Russel Vought aimed to fire more than 95% of CFPB staff. Acting Director Russel Vought remains in charge as Tuesday's nomination of Jonathan McKernan pends.
“The attorneys general warn that this may lead to financial institutions loosening their regulatory compliance, as was seen in the years leading up to the financial crisis,” the release added.
In the amicus brief, the attorneys general argue that efforts to shut down the CFPB or curtail its authority could keep consumers from reporting fraud, while also “significantly” reducing oversight of big banks.
The filing comes after the Trump administration essentially froze the CFPB’s enforcement activity earlier this month.
Russell Vought, the regulator’s acting director, stated he would halt the CFPB’s funding, informing the Federal Reserve that the bureau would not take its next draw of appropriated funding because it wasn’t necessary to fulfill its duties. The agreement prohibits the CFPB from firing employees for reasons not related to their work performance or conduct, and also blocks the Trump administration from trying to shift funding away from the agency.
On Feb. 14, Judge Amy Berman Jackson ordered the CFPB and its acting director not to terminate any agency employee except for cause related to job performance or conduct until March 3, when another hearing in the case will take place.
