Democratic States Sue White House Over CFPB Funding, Citing Constitutional Concerns

In a bold move, 21 attorneys general from Democratic-led states have filed a lawsuit against the Consumer Financial Protection Bureau (CFPB) and its director, Russell Vought, over the White House's decision to withhold funds from the agency. At the heart of the dispute is a long-standing argument over whether the CFPB can draw funds from the Federal Reserve's profits to operate. The White House has maintained that the CFPB cannot access these funds if the Federal Reserve does not have 'combined earnings' to allocate. However, lawmakers and policymakers who drafted the Dodd-Frank Act, which created the CFPB over a decade ago, argue that this phrase was never intended to require the Fed to make a profit. The White House's interpretation is being challenged in a separate lawsuit by the CFPB employees' union. The Democratic AGs contend that the CFPB was lawfully established by Congress and that the White House cannot pick and choose which government agencies to fund. With the CFPB facing a depletion of its operating funds in January, the Democratic AGs warn that defunding the agency will hinder efforts to protect consumers from predatory lenders, scammers, and other bad actors. "We cannot allow the White House to undermine the CFPB's ability to safeguard New Yorkers from financial harm," said New York Attorney General Letitia James. The White House has yet to comment on the lawsuit, which is set to have far-reaching implications for consumer protection in the United States.