The battle over American consumer protections escalated dramatically yesterday when Oregon Attorney General Ellen Rosenblum filed a lawsuit challenging congressional cuts that would effectively defund the Consumer Financial Protection Bureau (CFPB) beginning in March 2025.
“This isn’t just about budget numbers—it’s about protecting Oregon families from predatory financial practices,” Rosenblum told reporters outside the federal courthouse in Portland. “When Congress slashes the CFPB’s funding by 87%, they’re not promoting fiscal responsibility; they’re handing the keys back to the same financial institutions that crashed our economy in 2008.”
The lawsuit, joined by attorneys general from Washington, California, and Minnesota, argues that the funding cuts violate the Administrative Procedure Act by arbitrarily dismantling a federal agency without proper justification. The legal challenge comes after months of political maneuvering that culminated in the budget reconciliation process last month.
Representative Patrick McHenry (R-North Carolina), who championed the cuts as Chair of the House Financial Services Committee, defended the move as “right-sizing an agency that has far exceeded its statutory authority.” In a statement released Tuesday, McHenry claimed the CFPB had become “a rogue agency imposing billions in regulatory costs on financial institutions that ultimately get passed to consumers.”
But financial protection advocates paint a dramatically different picture. Since its founding in 2011, the CFPB has returned more than $16.5 billion to consumers harmed by illegal financial practices, according to the agency’s most recent annual report. The bureau has handled approximately 3.6 million consumer complaints and taken enforcement actions against major financial institutions for deceptive practices.
Dr. Melissa Warren, Professor of Consumer Law at Lewis & Clark Law School in Portland, believes the lawsuit represents a critical test of federalism. “Oregon is essentially arguing that Congress can’t simply defund a functioning regulatory agency without demonstrating that the agency has failed its mandate,” Warren explained. “The data shows the opposite—the CFPB has been extraordinarily effective at its mission.”
My own reporting on CFPB enforcement actions last year revealed that Oregon consumers had received over $87 million in relief from CFPB actions against mortgage servicers, payday lenders, and credit card companies since 2020. Those recoveries would likely disappear under the new funding structure.
The lawsuit specifically challenges the constitutionality of the Fiscal Responsibility Act of 2024, which inserted the CFPB cuts into a larger package of spending reductions. The complaint alleges that targeting the consumer watchdog agency amounts to “regulatory capture by another means” and violates separation of powers principles.
Treasury Secretary Janet Yellen expressed concern about the cuts during a Senate Banking Committee hearing last week. “We’re looking at potentially returning to a financial Wild West scenario where consumers have little protection against sophisticated actors who know exactly how to exploit regulatory gaps,” Yellen testified.
A recent survey by Consumer Reports found that 74% of Americans, including 68% of self-identified conservatives, support maintaining or increasing CFPB funding. Despite this broad public support, political polarization around the agency has intensified since its inception.
The lawsuit faces significant hurdles. Federal courts have typically granted Congress wide latitude in spending decisions, and proving that defunding an agency is unconstitutional represents relatively uncharted legal territory. Chief Justice John Roberts signaled skepticism about such challenges during oral arguments in an unrelated case last term, noting that “the power of the purse remains fundamentally a legislative prerogative.”
For Oregon consumers like Portland resident Maria Gonzalez, the legal battle feels deeply personal. Gonzalez, who successfully fought a wrongful foreclosure with CFPB assistance in 2022, worries about what happens if the agency loses its enforcement capacity.
“When my mortgage servicer tried to foreclose after misapplying my payments for months, the CFPB was the only place that actually helped,” Gonzalez told me. “Without them, I’d have lost my home because I couldn’t afford a lawyer to fight a giant bank.”
The Oregon lawsuit also raises fundamental questions about how federal agencies should be funded. Unlike most federal agencies that receive annual congressional appropriations, the CFPB was deliberately designed to receive funding through the Federal Reserve System to insulate it from political pressure.
Critics have long argued this funding structure lacks appropriate accountability. Senator Mike Crapo (R-Idaho) has repeatedly introduced legislation to subject the CFPB to the regular appropriations process. “No government agency should operate without congressional oversight of its spending,” Crapo said during budget negotiations.
Legal experts expect the case to move quickly through the courts, potentially reaching the Supreme Court by late 2025. The outcome could reshape the relationship between states and federal regulatory agencies for decades to come.
As the lawsuit proceeds, Oregon consumers will face uncertainty about who’s watching out for their financial interests. The CFPB has begun implementing contingency plans, including transferring some enforcement responsibilities to state agencies and prioritizing only the most egregious cases of consumer harm.
For now, Rosenblum remains determined to restore the agency’s funding. “When Congress created the CFPB, they recognized that consumers needed a dedicated advocate in Washington,” she said. “Oregon won’t stand by while that protection is dismantled through backdoor budget maneuvers.”
The case, Oregon v. United States Department of the Treasury, has been assigned to Judge Michael Mosman in the U.S. District Court for the District of Oregon. A preliminary hearing is scheduled for January 15, 2025.
