Attorney General Andrea Campbell has joined a lawsuit of more than 20 state AGs to stop the Trump administration from “dismantling” the Consumer Financial Protection Bureau.
The Trump administration earlier this month ordered the CFPB to stop nearly all its work, effectively shutting down an agency that was created to protect consumers after the 2008 financial crisis. Billionaire Elon Musk, of the Department of Government Efficiency, has been taking aim at the CFPB.
The agency has been a target of conservatives since it was proposed by Sen. Elizabeth Warren and pushed by President Barack Obama in the 2010 financial reform legislation. Warren has been warning that shutting down the CFPB will leave the $18 trillion consumer lending market without guardrails and could result in a financial catastrophe.
Now, AGs across the country are taking the Trump administration to court over the CFPB shutdown. The 23 state AGs in an amicus brief filed in Maryland U.S. District Court argue that dismantling the CFPB would significantly harm consumers and hamper enforcement of federal consumer protection laws.
The coalition of AGs is calling on the federal court to issue a preliminary injunction.
“The CFPB serves as a beacon for consumer protection and economic justice, working to lower costs, alleviate student debt, and more,” Campbell said in a statement. “They have been an important partner to my office as we pursue consumer protection cases on behalf of Massachusetts residents.
“I continue to support the vital mission of CFPB, especially at a time when families across the country are struggling with sky-high costs of living,” the Bay State AG added.
The CFPB is an independent agency that has helped ensure companies follow federal consumer protection laws, overseeing big banks, lenders, credit card companies, and mortgage servicers.
The agency has helped homeowners facing foreclosure stay in their homes, stopping banks from charging junk fees, and returning more than $20 billion to the pockets of consumers nationwide, according to the AGs.
In the brief, the coalition argues that the Trump administration’s efforts to destroy the CFPB could prevent consumers from reporting issues of fraud or deception. The coalition also writes that efforts to shut down the CFPB would significantly reduce oversight of very large banks, further harming consumers.
The AGs warn that this may lead to financial institutions loosening their regulatory compliance, as was seen in the years leading up to the Great Recession.
“… While States’ roles in consumer protection and financial regulation are robust and diverse, there are several forms of irreparable harm that many States and state residents will suffer as a result of defendants’ actions if relief is not granted,” the AGs wrote in the suit.
“First, CFPB has long been providing statutorily mandated services that benefit the States’ residents and support for the States’ own enforcement efforts,” they added. “Second, States have benefited from the CFPB’s supervision of compliance with consumer-protection laws by very large banks. Third, many States have benefited as well as from the CFPB’s collaboration in a number of areas of joint supervision and enforcement. The sudden withdrawal of these CFPB services, supervision and collaborative assistance will thus inflict immediate harm on States and their residents.”
The CFPB’s consumer-complaint system has fielded around 25,000 consumer complaints about financial products and services each week, according to the suit.
The referrals of consumer complaints to the CFPB are now “left in limbo,” the AGs wrote.
“Defendants’ actions to dismantle the CFPB have already begun to harm the States by suddenly increasing the burden on them to protect their residents through both enforcement and supervision of the financial industry,” the AGs wrote.
“The loss of CFPB’s partnership has concrete and far-reaching implications: from collaborating on supervisory examinations, to sharing of complaints and trend data, to providing training, to partnering on joint investigations and litigations, the CFPB has been a force multiplier for States’ consumer-protection efforts,” they added. “Absent a preliminary injunction to prevent the sudden loss of these significant contributions, the States will be unexpectedly stretched.”
The other state AGs who filed the suit are from: Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington, Wisconsin, and D.C.
Herald wire services were used in this report.