by Nahlah Abdur-Rahman
December 23, 2025
The consumer watchdog will run out of funding early next year if the Federal Reserve does not grant the money for its operations.
New York Attorney General Letitia James and several other state attorneys have sued the Trump administration over its efforts to shut down the Consumer Financial Protection Bureau.
Twenty other state and district attorneys joined James in the lawsuit, specifically against the Office of Management and Budget Director Russell Vought, filed Dec. 22. Since the beginning of Trump’s re-election as U.S. President, Vought has taken up the task of dismantling and shuttering the CFPB. He currently serves as the acting director of the consumer watchdog.
Politico reports that the Bureau will run out of funding in January 2026, leaving the agency’s protection efforts in jeopardy. Vought has already attempted to slash 90% of the Bureau’s staff, a move that a district court ruling has paused thus far.
This stunted mass firing has been further heightened by Vought’s more recent refusal to request more funding for the CFPB’s operations. The majority of its funding comes from the Federal Reserve. However, Vought has considered the funding request “illegal” while the Reserve has not run a profit. However, as it currently stands, the U.S. Central Bank has returned to profitability.
These efforts by Vought have sparked the legal action by James and her fellow Democratic attorneys from states such as California, Colorado, New Jersey, Maryland, and more. They deem Vought’s actions as unlawful, given the CFPB’s legal duty to work with states on consumer issues.
“Defunding the Consumer Financial Protection Bureau will make it harder to stop predatory lenders, scammers, and other bad actors from taking advantage of New Yorkers,” said Attorney General James in a statement regarding the suit. “My office and attorneys general across the country rely on the CFPB for consumer complaints and other data to get justice for consumers. The administration’s actions are a handout to those who drive up costs by cheating hardworking Americans, and I will keep fighting to ensure they follow the law and our Constitution.”
In partnership with states, the CFPB also holds financial institutions accountable, helping U.S. consumers gain back millions in restitution. If the watchdog were to shut down, banks and lenders would face less federal oversight, leaving borrowers more vulnerable to unfair and predatory practices, as reported by U.S. News.
“Scammed consumers will no longer be able to contact the CFPB to investigate and pursue financial institutions that cheated them,” explained consumer attorney Danny Karon, a lecturer at The Ohio State University Moritz College of Law, to the news outlet. “Smoking out financial abuse was the CFPB’s bread and butter, having recovered over $21 billion for people cheated by Wall Street and others.”
The case regarding the legitimacy of Vought’s actions to shut down the Bureau will be heard in February of next year.
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