On December 22, the attorneys general from 22 states and territories filed a complaint in an Oregon federal district court for declaratory and injunctive relief against the CFPB, the Fed, and the acting director of the CFPB. The complaint challenged the CFPB’s reversal of its longstanding interpretation of the Dodd-Frank Act’s funding mechanism. Specifically, the complaint alleged the current acting director’s determination that the CFPB cannot and will not request funding from the Fed unless the Fed is “profitable” (i.e., its interest income exceeds its expenses) violates the APA and the U.S. Constitution by disregarding congressional mandates and statutory definitions. The complaint noted the Fed’s practice of recording a “deferred asset” when expenditures exceed income does not affect its ability to meet its obligations, including transfers to the CFPB. As previously covered by InfoBytes, former Fed officials filed an amicus brief supporting the view that the Fed’s lack of profits does not prevent it from fulfilling its statutory funding duties to the CFPB.

As previously covered by InfoBytes, the U.S. District Court for the District of Columbia held that the Trump Administration’s claim that a “lapse” in funding did not justify noncompliance with the Washington, D.C., court’s injunction.

The attorneys general complaint alleged six causes of action, including violations of the APA, the separation of powers doctrine, and that the challenged actions were ultra vires (i.e., exceeded the agency’s authority). The plaintiffs also seek a declaratory judgment that the Fed’s “combined earnings” means the Fed’s gross revenues without any deduction for expenses, and that the Fed is required to transfer to the CFPB from its “combined earnings” the amount the CFPB director determines is reasonably necessary to carry out the Bureau’s operations. The plaintiffs ask the court to declare the decisions unlawful, set them aside, and compel the CFPB and the Fed to resume funding the CFPB as required by law.