A coalition of 21 states and the District of Columbia has filed a lawsuit seeking to block the Trump administration from defunding the Consumer Financial Protection Bureau by refusing to request funds from the Federal Reserve, Reuters reports.

The lawsuit, filed in federal court in Oregon, argues that the administration’s decision violates Congress’ authority and the Constitution’s separation-of-powers principle. State officials warn that withholding funds would prevent the CFPB from fulfilling its legal obligation to provide consumer complaints.

The agency, created in 2011 under the Dodd-Frank Act following the 2008 financial crisis, has returned more than 21 billion US dollars to consumers who were subject to improper charges. Unlike most federal agencies, the CFPB is funded directly by the Federal Reserve rather than through annual congressional appropriations.

President Trump, who returned to office in January, has sought to dismantle the CFPB. Acting head Russell Vought, his budget director, has effectively halted many agency operations, though litigation has stalled efforts to remove most employees.

According to a November 10 court filing, the CFPB could face a funding shortfall as early as 2026, citing Federal Reserve losses since 2022 that prevent additional transfers.

New York Attorney General Letitia James described the administration’s actions as “a handout to those who drive up costs by cheating hardworking Americans” and reaffirmed her commitment to the legal challenge.

Separate lawsuits have also been filed by a federal employees’ union and several nonprofit organisations in Washington, D.C., and California seeking to compel the CFPB to resume requesting funds from the Fed.