Legal Battle Over CFPB Funding Escalates

A coalition of Democratic attorneys general has sued the White House, challenging its attempt to withhold funds from the Consumer Financial Protection Bureau (CFPB). The administration argues the CFPB cannot draw funds from the Federal Reserve without its profits, citing the Dodd-Frank Act. The concern is the CFPB's ability to perform its role in consumer protection.

A coalition of 21 Democratic-led state attorneys general has initiated legal action against the White House, questioning its stance on withholding funds from the Consumer Financial Protection Bureau (CFPB). This lawsuit targets the administration's argument that the agency can only be financed through Federal Reserve profits.

The Federal Reserve, which has been incurring losses since 2022 due to interest rate hikes and low-interest pandemic bonds, is central to this dispute. Current White House interpretation suggests the CFPB is prohibited from drawing necessary funds without the Federal Reserve's 'combined earnings,' a notion rooted in the Dodd-Frank Act but contested by its original legislators.

Critics, including the CFPB employee union and state attorneys general, argue that this interpretation undermines the bureau's operational integrity and its role in thwarting fraudulent activities. New York's Attorney General Letitia James highlights the critical impact on consumer protection if the bureau's operations falter due to funding constraints.

(With inputs from agencies.)