Trump Administration to Appeal Judge’s Preliminary Order to Keep CFPB Intact

The on-again, off-again saga of the Consumer Financial Protection Bureau (CFPB) continues. The Trump administration on Saturday (March 29) filed a claim in the U.S. Court of Appeals asking it to weigh in on a decision issued Friday that seemingly gave the agency a new lease on life after a series of efforts to dismantle it.

It was just the latest turn in the drama regarding the agency inside the Beltway. Its future and the confirmation of director nominee Jonathan McKernan had been on hold pending several court cases. The most significant was the lawsuit brought by the National Treasury Employees Union et al. against acting CFPB Director Russell Vought. That case was the subject of a ruling late Friday (March 28) when a federal judge blocked the Trump administration from dismantling the CFPB and ordered that all terminated employees be reinstated. Those employees were told by Vought to cease working on Feb. 10.

“The defendants cannot expect the Court to be comforted by their recent announcement to employees that they should perform their statutory functions when they are simultaneously insisting that the term is so vague, no one — not even the Acting Director of the agency — knows what it means,” wrote Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia in a sharply worded memorandum opinion, granting a preliminary injunction to halt the dismantling of the CFPB.

Jackson’s decision orders the preservation of the CFPB’s status quo while the case proceeds on its merits, effectively preventing the agency’s closure and the termination of its staff and contracts. The court found that the plaintiffs demonstrated a likelihood of success on their claim that the Feb. 10 order from Vought, instructing CFPB employees to “please do not perform any work tasks,” constituted a final agency action that was unlawful and lacked a rational basis.

The court highlighted the rapid sequence of events following Vought’s appointment, including the directive to halt litigation, supervisory activities, and the overhaul of the agency’s digital presence, coupled with plans for mass firings and the termination of contracts, as evidence of an intent to “totally eliminate” the CFPB, echoing President Trump’s stated goal.

Tense Exchange

Another statement from Jackson’s opinion underscores her view of the administration’s actions. This exchange with CFPB Chief Operating Officer Adam Martinez during an evidentiary hearing highlighted the administration’s approach and fueled the court’s decision to intervene.

“Would you say that sending out an order that says ‘Do no work’ is typical? … Would you say that canceling all the contracts before the analysis as to whether these are duplicative, worthwhile, not worthwhile is typical? … Would you say that firing all probationary employees and two-year employees from the get-go is typical? … Would you say that trying to implement a RIF [reduction in force] without notice before the new director is even put in place is typical? … And would you say putting the rest of the employees on administrative leave with an order to do no work is typical?

“The Witness: No.”

The preliminary injunction reinstates the agency’s workforce, preserves its contracts and data, and ensures employees can resume their statutorily required duties. The implications of the decision will undoubtedly be the subject of debate as the week and the status of the appeal are determined.

Jackson’s opinion tracks with the perspective expressed over several recent interviews between PYMNTS CEO Karen Webster and QED Investors partner Amias Gerety. Gerety, a former assistant treasury secretary in the Obama administration, believed that the CFPB was created by Congress and validated by the Supreme Court and therefore needed to be managed rather than dismantled.

At the heart of the controversy is what Gerety calls the CFPB’s statutory “shalls” — nonnegotiable mandates written into the agency’s charter. These include, according to Gerety, maintaining dedicated offices for service members, older Americans and fair lending as well as financial education and complaint collection.

“The CFPB has obligations,” Gerety told Webster recently. “Congress wrote a bunch of ‘shalls’ into the law. These are not ‘mays,’ these are not ‘authorized to,’ these are absolute requirements that the CFPB director has to do.”

Webster has also weighed in on the CFPB, noting that “The challenge for the CFPB under new leadership will be to maintain its role as a watchdog while ensuring it does not stifle innovation in financial services. Consumers need protection, but they also need access to evolving financial tools that meet their needs in the digital economy.”