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Baltimore Court Ruling on CFPB Funding Controversy

(Reuters) – A federal judge in Baltimore has dismissed the city’s attempt to prevent the Consumer Financial Protection Bureau (CFPB) from redistributing its reserve funds back to the U.S. Federal Reserve or the Department of the Treasury. The ruling came on Friday from U.S. District Judge Matthew Maddox, who indicated that Baltimore’s request for a preliminary injunction was not justified. The judge noted that it was improbable for the city to demonstrate that the CFPB had made a definitive decision to curb its funding.

The lawsuit was initiated by Baltimore and the nonprofit Economic Action Maryland Fund, encompassing the former Maryland Consumer Rights Coalition, on February 12. They sought to block Acting Director Russell Vought’s actions, which they argued would deprive the CFPB of essential operational funds, rendering it ineffective.

In responding to the ruling, the plaintiffs’ attorney stated that they would evaluate the implications of the decision. Meanwhile, the CFPB did not provide an immediate response regarding the matter.

Criticism of the CFPB has been prevalent among various Republican lawmakers and business organizations, who have long argued that the agency wields excessive power without adequate oversight. Notably, the U.S. Supreme Court dismissed a challenge in May from payday lender associations concerning the agency’s funding methodology.

In their pursuit of an injunction, Baltimore referenced a letter dated February 8 sent by Vought to Federal Reserve Chair Jerome Powell, which stated that the CFPB did not require funding for its upcoming budget allocation. Additionally, a February 11 email from CFPB Chief Operating Officer Adam Martinez indicated that the agency had reached out to the Fed regarding the potential for returning funds.

However, Judge Maddox remarked that Baltimore’s legal challenge was mostly based on a speculative and hypothetical scenario regarding the CFPB’s financial decisions, without concrete evidence that such actions had been finalized or would incur legal ramifications.

In a separate but related legal challenge in Washington, D.C., a lawsuit questions former President Donald Trump’s purported attempts to dismantle the CFPB, and senior officials within the agency have cast doubts on the likelihood of returning the reserves in that context.

During his Senate confirmation hearing on February 27, Jonathan McKernan, nominated by Trump to lead the CFPB, assured lawmakers of his commitment to uphold consumer financial protection laws. He also expressed intentions to optimize the agency’s size and enhance its accountability.

The ongoing case is titled Mayor and City Council of Baltimore et al v CFPB et al, filed in the U.S. District Court for the District of Maryland under case number 25-00458.

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