Lawsuit puts a pause on Trump’s plan to defund CFPB
The Trump administration’s plan to defund the Consumer Financial Protection Bureau (CFPB) has been put on pause.
The City of Baltimore and the Economic Action Maryland Fund (EAMF) filed a lawsuit on Wednesday against the CFPB and its acting director, Russell Vought, seeking to prevent the Trump administration from unilaterally defunding the department.
A day later, the plaintiffs and defendants in the suit filed a joint motion stating that they’ve agreed to a preliminary injunction on any efforts by the CFPB or Vought to disrupt funding or shut down the department.
The injunction expires on Feb. 28. The CFPB and Vought have until Feb. 20 to file an opposition to the motion for preliminary injunction. The lawsuit was filed on behalf of Baltimore and EAMF by Democracy Forward, a nonprofit that litigates issues related to democracy and “social progress.”
“The Consumer Financial Protection Bureau protects all Americans from predatory and discriminatory practices,” Democracy Forward president and CEO Skye Perryman said in a statement. “It has returned $20 billion back to the American public. It is unfortunate we have had to resort to litigation to protect this consumer watchdog.”
In the original complaint, plaintiffs argue that since his appointment to acting CFPB director on Feb. 7, Vought has attempt to abolish the CFPB through a series of actions that sidestep Congress.
The day after his appointment, Vought ordered that all CFPB workers stop working, and he requested to the Federal Reserve that the department receive $0 in funding for the next fiscal quarter. He also announced a plan to return $711 million in funding to the Fed.
Plaintiffs argue that these actions are illegal because the CFPB was created by Congress with the Dodd-Frank Act of 2010. They also argue that the administration does not have legal authority to move or return congressionally appropriated funds.
The CFPB has been in chaos since Feb. 1 when Trump fired then-director Rohit Chopra and named Treasury Secretary Scott Bessent as acting director. Bessent promptly ordered CFPB staffers to “stop working.” Trump replaced Bessent with Vought a week later, and sooner after, the president nominated Jonathan McKernan to be the CFPB’s full-time director.
Late Tuesday night, staffers at CFPB were sent termination notices. According to CNBC, most of those staffers were on probationary status or were recent hires who were considered the easiest to dismiss.
The department’s operations remain frozen after Vought’s actions. Elon Musk and his team have been granted access to CFPB’s data.
The internal turmoil leaves many CFPB stakeholders in limbo. Legal experts say the department’s paralysis isn’t a license for the real estate industry to ignore regulations, but they add that a prolonged freeze would likely result in state regulators increasing enforcement of select rules.
Different sectors of the real estate industry have skin in the game, including appraisers. While appraisers won’t shed any tears over the end of the PAVE Task Force — which fell victim to Trump’s assault on diversity, equity and inclusion (DEI) policies — many were counting on Chopra and the CFPB to issue new rules in regard to how appraisal fees are disclosed on closing documents.