New York Joins Lawsuit to Block Consumer Financial Protection Bureau Shutdown
ALBANY, N.Y. (NEXSTAR) — New York Attorney General Letitia James and 22 other attorneys general joined a lawsuit to keep the Consumer Financial Protection Bureau (CFPB) running. They warned that shutting down the watchdog agency exposes regular people in states like New York to predatory loans, discriminatory fees, and unfair foreclosures.
The CFPB: A Vital Safeguard for Consumers
A Critical Partnership with State Regulators
In an amicus curiae or “friend of the court” brief, the states warned that consumers will suffer without the CFPB system that fields about 25,000 weekly consumer complaints. It helps homeowners facing foreclosure and monitors non-bank mortgage lenders. And it collects lending data that states like New York track to oversee their own markets and spot financial risks.
The Consequences of a Shutdown
New Yorkers at Risk
New Yorkers who need help to quickly resolve a mortgage crisis or who need protection from unfair charges risk losing their safety net. Without this CFPB system, the lawsuit argues, New Yorkers will be much more vulnerable to risky loans and big banks like JPMorgan or Wells Fargo who face no federal accountability.
The Loss of a Trusted Supervisor
State Agencies Will Suffer
In New York, the Department of Financial Services enforces financial regulations, but that’s typically in collaboration with the CFPB. Lacking that partnership, fraud and predatory lending—especially in student loans, credit reporting, and foreclosures, especially downstate—would likely increase.
The Fate of the Civil Penalty Fund
Unpaid Settlements and Unfairness
The lawsuit also claims that the states will lose a trusted supervisor of non-bank financial firms, digital payment companies, and payday lenders. CFPB is supposed to help state officials coordinate joint checks of financial institutions and loan servicers. Without it, state offices will scramble to stretch limited resources to force companies to continue prioritizing consumer protections.
Conclusion
The lawsuit seeks a court order to stop further cuts to the CFPB, warning that deregulation will only endanger consumers and state agencies, creating a regulatory vacuum similar to the one that led to the 2008 financial crisis.
FAQs
- What is the Consumer Financial Protection Bureau?
The CFPB is a federal agency responsible for regulating and enforcing federal consumer financial laws and regulations. - What is the purpose of the CFPB?
The CFPB aims to ensure that banks, lenders, and other financial institutions operate fairly and transparently, protecting consumers from predatory practices and unfair fees. - What are the potential consequences of shutting down the CFPB?
Shutting down the CFPB could lead to an increase in predatory lending, discriminatory fees, and unfair foreclosures, ultimately harming consumers and state agencies.
