California, other states file suit to prevent shutdown of federal consumer agency

California on Monday joined 20 other states and the District of Columbia in a lawsuit aimed at stopping the federal Consumer Financial Protection Bureau from being dismantled and shut down by the Trump administration.

The lawsuit filed in U.S. District Court in Eugene, Oregon, by Democratic attorneys general accuses Acting Director Russell Vought of attempting to illegally withhold funds from the agency by illegally interpreting its funding statutes. Also named as defendants are the agency itself and the Board of Governors of the Federal Reserve.

“For California, the CFPB has been an invaluable enforcement partner, working hand-in-hand with our office to protect wallets and stop unfair trade practices. But once again, the Trump Administration is attempting to weaken and ultimately dismantle the CFPB,” said California Atty. Gen. Rob Bonta announced the 41-page lawsuit at a news conference.

The lawsuit claims the agency is crucial for states to carry out their own consumer protection missions and that closing it would deprive them of statutorily guaranteed access to a database maintained by the bureau that tracks millions of consumer complaints, as well as other data.

The agency did not immediately respond to a request for comment on the lawsuit, led by Bonta and the attorneys general of Oregon, New York, New Jersey and Colorado.

Created by Congress in 2010 after the subprime mortgage abuses that gave rise to the financial crisis, the agency is funded by the Federal Reserve to protect it from political pressure.

The Dodd-Frank Act requires the agency director to request a reasonable amount of funding to carry out the CFPB’s duties from the “combined profits” of the Federal Reserve.

Before this year, this was interpreted to mean the gross revenues of the Federal Reserve. But a Justice Department opinion says that should be interpreted to mean the Federal Reserve’s profits, from which it has no profits because it has been operating at a loss since 2022. The lawsuit claims the interpretation is wrong.

“Defendant Russell T. Vought has worked tirelessly to shut down the operations of the CFPB by any means necessary – denying Plaintiffs access to CFPB resources to which they are legally entitled. In this action, Plaintiffs challenge Defendant Vought’s most recent efforts to do so,” the federal lawsuit states.

The complaint alleges the agency will run out of cash by next month if the policy is not rescinded. Bonta said he and other attorneys general have not decided whether they will seek a restraining order or temporary injunction to change the new funding policy.

Before the second Trump administration, CPFB boasted that it had returned nearly $21 billion to consumers nationwide through enforcement actions, including against Wells Fargo in San Francisco following a scandal involving the creation of accounts never sought by customers.

Other major lawsuits have been filed against student loan servicer Navient for mishandling payments and other issues, as well as against Toyota Motor Credit for charging higher interest rates to Black and Asian customers.

However, this year the agency dropped some notable cases. She prematurely terminated a consent order with Citibank regarding allegations of discrimination against customers with Armenian last names in Los Angeles County.

He also dropped the lawsuit against Zelle that accused Wells Fargo, JPMorgan Chase, Bank of America and other banks of rushing the payments app’s rollout, resulting in $870 million in fraud-related losses for users. The app denied the allegations.

Vought was one of the chief architects of Project 2025, a Heritage Foundation plan to reduce the size and power of the federal bureaucracy under a second Trump administration. In February, he ordered the agency to halt almost all of its activities and has since sought to significantly scale back it.

The lawsuit filed Monday is the latest legal effort to keep the agency in business.

A lawsuit filed in February by the National Treasury Employees Union and consumer groups accuses the Trump administration and Vought of trying to unconstitutionally abolish the agency, created by an act of Congress.

“It’s deflating and it’s unfortunate that Congress is not defending the power of the purse,” said Colorado Atty. said General Philip Weiser during Monday’s press conference.

“At other times, Congress has vigilantly safeguarded its authority, but because of political polarization and fear of criticizing this president, Congress is not doing so,” he said.