Banking and Finance Law Daily Wrap Up, CONSUMER FINANCIAL PROTECTION BUREAU—State attorneys general sue Vought, CFPB, Fed to prevent Bureau’s ‘complete defunding’, (Jan 2, 2026)
Organizations Mentioned:Consumer Financial Protection Bureau | Federal Reserve Board of Governors
The coalition of 22 state AGs seeks to ensure that the CFPB’s mandate to “provide vital information to states to aid their own consumer protection efforts” is not thwarted or curtailed.
Led by New York Attorney General Letitia James, a coalition of 22 state attorneys general filed a lawsuit seeking declaratory and injunctive relief against Consumer Financial Protection Bureau Acting Director Russell Vought to prevent the “complete defunding” of the CFPB and to ensure that the Bureau’s mandate to “provide vital information to states to aid their own consumer protection efforts” is not thwarted or curtailed. The state AGs’ complaint, which was filed on Dec. 22, 2025, in the federal district court in Eugene, Oregon, notes the various ways in which the Trump administration in general and the CFPB’s acting director in particular have sought to shut down the Bureau’s operations. The plaintiff coalition underscores that the states will be injured “if Defendant Vought engineers a CFPB shutdown by “unlawfully refusing to request operating funds” from the Federal Reserve. Moreover, the state AGs contend that they “would not be able to avoid the harm from the loss of the CFPB’s Consumer Response System because no other equivalent nationwide system exists” (State of New York v. Vought, No. 0:25-cv-02384 (D. Or. Dec. 22, 2025)).
The coalition’s complaint against Vought, the CFPB, and the Federal Reserve Board was jointly filed by the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Wisconsin, and the District of Columbia.
New York Attorney General Letitia James remarked that defunding the CFPB “will make it harder to stop predatory lenders, scammers, and other bad actors from taking advantage of New Yorkers. My office and attorneys general across the country rely on the CFPB for consumer complaints and other data to get justice for consumers.”
Backdrop. In November of 2025, based on an opinion issued by the Department of Justice’s Office of Legal Counsel (OLC), the Consumer Financial Protection Bureau notified the U.S. District Court for the District of Columbia that it could not lawfully draw funds from the Federal Reserve System under the Dodd-Frank Act (National Treasury Employees Union v. Vought, No. 1:25-cv-00381-ABJ (D.D.C. Nov. 10, 2025)).
According to the CFPB’s statement about its court filing, the OLC had determined that “the Bureau may not legally request funds at this time from the Federal Reserve” because “the Federal Reserve System currently lacks any ‘combined earnings’ from which the Bureau may draw funding, as required by Dodd-Frank.” While the Bureau reported that it expected to have sufficient funds to continue operations “through at least Dec. 31, 2025,” a pertinent funding request by the CFPB for future operations beyond that date has been viewed as unlikely (see Banking and Finance Law Daily, Nov. 12, 2025).
Additional highlights—coalition’s complaint. Against this backdrop, the complaint filed by the coalition of state AGs alleges that the CFPB and its acting director have violated the Administrative Procedure Act by:
taking agency actions that are in excess of their statutory authority;
taking agency actions that are contrary to law;
taking agency actions that are arbitrary and capricious; and
withholding agency actions that are required.
Moreover, the state AGs allege that the CFPB and its acting director have taken ultra vires agency actions not authorized by Congress and/or in violation of the “separation of powers doctrine” by usurping legislative authority.
The coalition asserts that declaratory relief against all the defendants—Vought, the CFPB, and the Federal Reserve Board—“is necessary to provide clarity regarding Plaintiffs’ rights and Defendants’ obligations with respect to funding the CFPB’s operations and to ensure that Plaintiffs can continue to rely on the CFPB’s operations.” Along these lines, the state AGs assert that the court should:
declare that the “combined earnings” of the Federal Reserve, “as set forth at 12 U.S.C. § 5497(a)(1), means the Federal Reserve’s gross revenues without any deduction for its expenses;”
declare that the challenged agency decisions by the CFPB and Vought are unlawful;
declare that Vought’s and the CFPB’s decision not to request funds from the Federal Reserve Board of Governors “is ultra vires;”
declare that the “combined earnings” of the Federal Reserve, “as set forth at 12 U.S.C. § 5497(a)(1), means the Federal Reserve’s gross revenues without any deduction for its expenses;”
declare that the Federal Reserve is required, “pursuant to 12 U.S.C. § 5497(a)(1), to transfer to the CFPB from such ‘combined earnings’ the amount that the Director of the CFPB has determined to be reasonably necessary to carry out the CFPB’s operations;”
set aside the challenged agency decisions “pursuant to 5 U.S.C. § 706(2);”
“permanently enjoin the challenged decisions and any steps taken to implement the challenged decisions;”
compel Vought and the CFPB, “pursuant to 5 U.S.C. § 706(1) to take the actions required by 12 U.S.C. § 5497;”
retain jurisdiction to monitor the defendants’ compliance “with this Court’s judgment;”
award the plaintiff coalition “their reasonable fees, costs, and expenses, including attorneys’ fees;” and
award such additional relief “as this Court may deem just and proper.”
Attorneys: Patrick Gibson, Office of the New York State Attorney General, for the State of New York.
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