State attorneys general argue shutting down federal consumer financial agency would cause catastrophic harm to consumers

The Trump administration’s actions to gut a new federal agency whose purpose it is to help consumers financially is among its most egregious.

Twenty-three attorneys general are arguing that shuttering the Consumer Financial Protection Bureau or CFPB would cause catastrophic harm to consumer protections nationwide, leaving state agencies with the sole responsibility to protect consumers. 

They submitted an amicus brief in Mayor and City Council of Baltimore v. Consumer Financial Protection Bureau, a lawsuit challenging the Trump Administration’s efforts to dismantle agency.

“The CFPB was created to protect consumers from being taken advantage of by corporations,” California Attorney General Rob Bonta said in a statement. “As the backbone of federal consumer financial protections, the CFPB is a force multiplier for California’s consumer protection efforts, working to protect consumers from fraud, abuse, and unfair business practices and returning over $20 billion to Americans since its creation.” 

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, Bonta said. 

“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,” he said. 

The CFPB was created after the 2008 financial crisis, when Congress concluded the crisis resulted in part from the failure of federal banking and other regulators to address significant consumer protection issues detrimental to consumers and the safety and soundness of the banking system.

Congress established the CFPB and gave it authority to enforce many federal consumer protection statutes and enacted additional regulations.

Bonta said for more than a decade, the CFPB has served as a partner to state attorneys general and state banking regulators, by working to protect consumers against fraudulent and abusive practices and by advancing a fair and level playing field in consumer financial markets by issuing regulations under federal law. 

In the last month, the Trump Administration has taken a series of actions intended to debilitate the CFPB, including issuing a suspension of work across the agency, terminating probationary employees, and announcing a decision not to draw additional funding from the Federal Reserve. 

“These actions appear to be part of a unilateral effort to permanently shut down the agency, including programs and operations mandated by federal law,” he said. 

In the brief, filed in the U.S. District Court for the District of Maryland, the attorneys general argue the haphazard and chaotic shuttering of the CFPB: 

• Has caused and will continue to cause irreparable harm to the wellbeing of consumers and the states’ own enforcement efforts. 
• Leaves no oversight over large national banks. 
• Rapidly and substantially increases the burden on state agencies to protect consumers. 

For example, one of the most significant losses associated with the CFPB’s shuttering is the loss of its consumer-complaint system, which handles about 25,000 consumer complaints on financial products and services each week. This system allows the CFPB to identify and prioritize complaints where a consumer is at risk of imminent home foreclosure and then refer consumers to housing counselors to help them avoid losing their home.

In addition, the CFPB is the only federal regulator of nonbank mortgage lenders, and the only federal agency that’s authorized to supervise and bring enforcement actions against national banks in connection with “abusive” practices.

Bonta said the CFPB’s sudden gutting also means that there will be no oversight of large banks, such as JPMorgan and Wells Fargo, for their compliance with consumer financial-protection laws. 

“Very large financial institutions that compete with state-chartered banks will have the freedom to loosen their regulatory compliance and profit accordingly – to the detriment of consumers and competing banks and credit unions – as was seen in the years leading up to the 2008 financial crisis,” he said. 

Among the other states filing the brief are New York, Colorado, Delaware, Hawaii, Illinois, Maine, Massachusetts, Michigan, Nevada, North Carolina, Oregon, Washington, and Wisconsin.