The White House finds itself on the receiving end of a major lawsuit. A coalition of 21 attorneys general from Democratic-led states sued the Consumer Financial Protection Bureau and its director, Russell Vought, on Monday, asserting that the White House’s argument to withhold funds from the consumer protection agency is unconstitutional.
“We’re asking the court to order the Consumer Financial Protection Bureau to seek available funding and do its job,” California Attorney General Rob Bonta said at a press conference.
The lawsuit has to do with the Trump administration’s argument that the CFPB can only be funded by the Federal Reserve’s profits.
At the center of the dispute is the CFPB’s unusual funding structure under the Dodd-Frank Act, which allows the agency to draw money directly from the Federal Reserve rather than through annual congressional appropriations. The White House contends that because the Federal Reserve has recently operated at a net loss, it has no “combined earnings” available to transfer, meaning the CFPB cannot legally access funds under the statute.
The attorneys general reject that interpretation, arguing that it misreads the law and gives the executive branch improper power to defund an agency without congressional approval. They say Congress intentionally insulated the CFPB from political pressure by guaranteeing a stable funding mechanism — a legal question that will ultimately be decided by the courts.
The states warn that allowing the funding cutoff to stand would have immediate and far-reaching consequences, including forcing the CFPB to halt supervision of banks and lenders, stop investigating fraud and predatory practices, and suspend its consumer complaint system.
Whether those outcomes will occur, and how quickly, remains uncertain and depends on court rulings and interim funding decisions. The lawsuit also raises broader constitutional questions about separation of powers, specifically whether a president can effectively nullify a law by refusing to execute its funding provisions. The resolution of this case could have significant implications for the independence of federal regulatory agencies, but those implications remain speculative until the litigation is resolved.
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“Defunding the Consumer Financial Protection Bureau will make it harder to stop predatory lenders, scammers, and other bad actors from taking advantage of New Yorkers,” said Attorney General Letitia James of New York.Beyond the immediate legal arguments, the outcome could set a precedent for how much control the administration can exert over agency operations and funding in the future. It also illustrates the role of state governments in defending the enforcement and oversight mechanisms intended to protect the public.
As the courts weigh the claims, the case serves as a reminder that the structure and independence of federal agencies are essential not only for enforcing laws, but for ensuring accountability, transparency, and public trust in government. The final ruling could influence the way regulatory bodies operate for years to come.