The Trump administration has launched its most aggressive legal assault to date on the United States' primary consumer financial protection agency, seeking to completely dismantle the watchdog by challenging its fundamental funding structure.
Legal Battle Over Funding Mechanism
In a significant court filing, administration attorneys argued that the Consumer Financial Protection Bureau's current funding mechanism is unlawful. They specifically claimed the agency anticipates exhausting its currently available funds in early 2026, creating a pathway for its potential closure.
The justice department's office of legal counsel issued an opinion stating the CFPB cannot currently draw money from the Federal Reserve, its typical funding source. This argument hinges on interpreting the "combined earnings of the Federal Reserve System" as referring to profits, noting that the Fed has operated at a loss since 2022.
Persistent Efforts to Gut Consumer Protection
This represents the latest in a series of attempts by Donald Trump's officials to close the agency, including previous efforts to fire the vast majority of its workforce. These actions have sparked months of legal wrangling and drawn sharp criticism from Democratic lawmakers.
The CFPB has been a cornerstone of consumer financial protection since its establishment in the wake of the 2008 financial crisis. The agency has returned more than $21bn to US consumers through its oversight of financial firms.
Russell Vought, the White House Office of Management and Budget director, stated in October that he plans to shut down the agency, estimating the process would take up to three months. He has already suspended most of the agency's work pending a decision from the full DC circuit court of appeals.
Political Backlash and Legal Precedent
Senate banking committee Democrats strongly criticised these efforts in a letter to Vought, noting that a federal court has specifically blocked illegal attempts to shut down the agency. They emphasised that "American families stand to pay the price" for these actions.
Several federal judges have previously rejected similar arguments about the CFPB's funding when used by companies attempting to dismiss lawsuits brought by the agency, as reported by Politico. A lower court order has already blocked the proposed firing of approximately 90% of the agency's staff.
The ongoing legal battle continues as the administration pursues what critics describe as an unprecedented campaign against a federal consumer protection agency with a proven track record of returning billions to American consumers.
