Samuel Corum/Bloomberg
New York Attorney General Letitia James is co-leading a coalition of 23 attorneys general in opposing efforts by the Trump administration and Elon Musk to disband the Consumer Financial Protection Bureau.
In an amicus brief filed by the U.S. District Court of Maryland, James and the other attorneys general argue that dismantling the CFPB would significantly harm consumers and hamper enforcement of federal consumer protection laws.
“Eliminating the CFPB will hurt everyday people and benefit billionaires like Elon Musk and his friends,” James said in a press release. “The CFPB has put billions of dollars back in the pockets of Americans by going after predatory lenders, deceptive companies, and slashing junk fees. The only reason to get rid of this watchdog agency is to protect bad actors.”
Dismantling the CFPB would leave state agencies with the sole responsibility to protect consumers. The amicus brief stated that many states depend on the CFPB’s resources to properly carry out enforcement, and they are not prepared for the burden to shift onto them.
“In the absence of a functioning CFPB, States have suddenly lost the CFPB’s significant expertise and resources that can be invaluable in ongoing matters that protect their residents,” the brief said. “States’ access to the benefits provided by the CFPB has effectively ceased… As a result of defendants’ actions, the States and their residents face a significant risk of irreparable harm, and they will continue to face that risk as long as the CFPB remains effectively out of commission.”
On February 9, acting CFPB director Russell Vought directed the CFPB to stop all its ongoing work and to not begin any new investigations. The city of Baltimore, Maryland, filed a lawsuit against Vought and the CFPB on February 13.
Katalina Bianco, a senior legal analyst at Wolters Kluwer Law & Regulatory, said that various state regulators will likely have different responses to the prospect of the CFPB shutting down.
“It will be determined by individual states as to whether consumer financial protection is of importance,” Bianco told American Banker. “Much of that could come down to politics, as it always has with the CFPB: Democrats for, Republicans against. The stakes for the survival of the CFPB will not be the same for states that do not wish to promote the consumer financial protections of the CFPB.”
The 22 attorneys generals who supported the amicus brief represent Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.
California Attorney General Ron Bonta joined the coalition because “the CFPB has served as an invaluable partner to state attorneys general and state banking regulators” and dismantling it would harm the state of California’s efforts to protect its residents, according to a press release from California’s Office of The Attorney General.
“As the backbone of federal consumer financial protections, the CFPB is a force multiplier for California’s consumer protection efforts,” Bonta said in a press release. “The Trump Administration’s takeover of the CFPB is an effort to destroy the agency responsible for overseeing the mortgage markets, stopping predatory debt collectors, and preventing American families from being exploited by big banks and payday lenders. From sharing complaints and trend data, to providing training, and partnering on joint investigations and litigations, the loss of CFPB’s partnership has devastating and deep implications for California and households across the nation.”
The CFPB was formed in 2011 following the Great Recession to enforce federal consumer protection laws. Since its creation, the CFPB has worked with state attorneys general to address consumer issues related to banking, student loan servicers, mortgage servicers, auto lending, and other consumer financial matters.
One major impact for states highlighted in the amicus brief is the loss of the CFPB’s consumer complaint system.
“The CFPB’s statutorily mandated consumer-complaint system fields approximately 25,000 consumer complaints about financial products and services each week,” the brief said. “Although some States have similar mechanisms in place, those mechanisms by themselves cannot replace overnight the CFPB’s vast nationwide complaint intake system. In the CFPB’s absence, consumers will be left without critical resources. In some States, this includes the risk of foreclosure, a prototypical form of irreparable harm. This is particularly true given the rise of nonbank mortgage lenders that operate in multiple States, such as Rocket Mortgage, for which the CFPB is the only federal regulator with supervisory authority.”
Another impact mentioned in the brief was an imbalance between oversight of state banks and national banks, created by lack of federal supervision, if the CFPB is dismantled.
“In light of the CFPB’s dormancy, there is no federal regulator that is currently examining very large banks, such as JPMorgan and Wells Fargo, for their compliance with consumer financial-protection laws,” the brief said. “The very large financial institutions that compete with state-chartered banks will have carte blanche to loosen their regulatory compliance and profit accordingly—to the detriment of consumers—as was seen in the years leading up to the 2008 financial crisis. Meanwhile, state-chartered banks will remain subject to state supervision for their compliance with the same laws.”
One of the New York Department of Financial Services attorneys who signed the amicus brief, Chris D’Angelo, used to work at the CFPB as associate director of supervision, enforcement and fair lending (the no. 3 slot at the bureau) before leaving to work for the New York Attorney General’s office in 2019.
