The city of Baltimore voluntarily dismissed its lawsuit against the Consumer Financial Protection Bureau on Thursday, citing agency leadership’s repeated indications in court declarations that there is no mechanism to “transfer away money from, or otherwise relinquish control” over money in the bureau’s reserve fund.
The Justice Department, representing the CFPB, filed a motion to dismiss the case May 15.
“Our case derailed Russ Vought’s plan to defund the CFPB,” Skye Perryman, CEO of Democracy Forward, said in a statement Thursday, referencing the bureau’s acting director. “This is a big win for consumers.”
Consumer advocates, led by the Economic Action Maryland Fund, sued the CFPB on Feb. 12 – less than a week after Vought was tapped to lead the CFPB. On his first full day in charge of the bureau, Vought wrote the Federal Reserve to indicate that the CFPB would not take any unappropriated funding for the upcoming fiscal quarter.
“The Bureau’s current balance of $711.6 million is in fact excessive in the current fiscal environment,” Vought wrote Feb. 8 on X. “This spigot, long contributing to CFPB’s unaccountability, is now being turned off.”
However, in a March court declaration, the CFPB’s chief operating officer, Adam Martinez, said the bureau’s CFO determined, after conducting some research “that there indeed is no authority or mechanism to transfer excess funds back to the Federal Reserve.”
Further, if the CFPB were to reduce the reserve fund, it would only make more funding available for the agency to use now, CFPB CFO Ngagne Jafnar Gueye said in a court declaration.
The Baltimore case is hardly the highest-profile legal action against the CFPB’s multipronged effort to reduce itself from the inside. The National Treasury Employees Union sued the bureau in federal court in Washington, D.C., to stop repeated plans to fire up to 95% of the agency’s workforce.
“While the administration continues its efforts to dismantle the CFPB and weaken regulations that protect people from fraud and debt traps, we are delighted that the government concedes it cannot defund the bureau by transferring money from its reserve fund,” Marceline White, executive director of Economic Action Maryland Fund, said in a statement Thursday. “This is a win for ordinary folks.”
The dismissal Thursday comes without prejudice, meaning plaintiffs can sue the CFPB again on similar grounds.
“If Defendants later transfer Bureau funds in contradiction of their repeated representations about their lawful authorities, abilities, and intent, Plaintiffs will undertake further actions as appropriate,” the consumer advocates told the court Thursday.
The plaintiffs’ court victory hasn’t been without its hurdles. The judge who heard the Baltimore case denied consumer advocates’ request in March for a temporary restraining order, noting that the plaintiffs failed to show that CFPB leadership’s moves to defund the agency constituted a “final agency action” under the Administrative Procedure Act.
