SKN | Democratic Attorneys General Sue Trump Administration Over CFPB Funding Freeze

Nearly two dozen Democratic state attorneys general have filed a lawsuit against the Trump administration, seeking to force continued funding for the Consumer Financial Protection Bureau and prevent what they warn could amount to a de facto shutdown of the federal consumer watchdog.

The coalition of 22 attorneys general, led by Letitia James, filed the suit in federal court in Oregon. The complaint challenges the decision by CFPB Acting Director Russ Vought to stop requesting funds from the Federal Reserve, the agency’s designated funding source under federal law.

Dispute Over CFPB’s Unique Funding Structure

Unlike most federal agencies, the CFPB does not rely on congressional appropriations. Instead, Congress designed its funding mechanism to draw from the Federal Reserve’s “combined earnings,” a structure intended to insulate the bureau from political pressure. That framework was upheld last year by the Supreme Court, which rejected legal challenges brought by industry trade groups.

At the center of the current dispute is a legal interpretation advanced by the Justice Department’s Office of Legal Counsel. According to that view, “combined earnings” should be interpreted as profits. Because the Federal Reserve has recently reported operating losses due to higher interest expenses, Vought argues that the Fed has no profits to transfer—and therefore no funds available for the CFPB.

Vought has said that based on this interpretation, he cannot and will not request additional funding, a move that the attorneys general say would effectively halt the bureau’s operations as early as next month.

States Say Funding Cut Violates Federal Law

The attorneys general argue that the administration’s position directly contradicts the Dodd-Frank Act, which established the CFPB. Under Dodd-Frank, “combined earnings” are defined as the Federal Reserve’s gross revenues, without deductions for expenses such as interest payments.

In their filing, the states contend that refusing to seek funding is both unlawful and unconstitutional. They argue that eliminating CFPB funding undermines Congress’s authority to establish and finance federal agencies, violating the separation of powers.

“The CFPB has a legal obligation to provide states with consumer complaint data and assistance,” James said in a prepared statement. “That duty cannot be fulfilled without funding.”

Consumer Complaints and Enforcement at Risk

State attorneys general rely heavily on the CFPB for consumer complaint intake, market data, and enforcement coordination. According to James’ office, New York alone has referred more than 2,100 consumer complaints to the bureau since 2023.

The lawsuit asks the court to compel Vought to request funds from the Federal Reserve so the CFPB can continue meeting its statutory obligations. Without intervention, the states warn, consumers could lose a critical layer of federal oversight at a time when household finances remain under pressure from high borrowing costs and inflation-sensitive expenses.

The case adds another front to the broader legal and political battle over the CFPB’s role, independence, and future under the Trump administration.

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