A mass firing at the Consumer Financial Protection Bureau on Thursday leaves the agency without sufficient staff to fulfill its statutory goals or even the priorities laid out by the agency’s acting chief legal officer a day earlier, according to employees and their attorneys. Plus, the dramatic action once again puts some of the markets CFPB oversees at risk of malfunctioning.
About 1,500 of the CFPB’s 1,700 employees began receiving termination notices on Thursday afternoon. One such notice, signed by acting director Russ Vought, deemed the reduction in force (RIF) “necessary to restructure the Bureau’s operations to better reflect the agency’s priorities and mission.” Though the separation won’t take effect until June 16, access to work systems will be cut off at close of business Friday, according to the letter. No advance notice was provided, at odds with federal labor law or the agency’s collective bargaining agreement.
Some of the fired employees had just been reinstated in the past few weeks, after a federal judge reversed layoffs of term and probationary employees.
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The purge was an apparent exploitation of a loophole that an appeals court handed Vought and CFPB leadership last weekend. D.C. District Court judge Amy Berman Jackson had forbidden CFPB to fire employees or act to shut down the agency with a preliminary injunction. On appeal, the D.C. Circuit upheld part of the injunction but granted CFPB authority to fire workers or stop work, but only “after a particularized assessment” that workers are “unnecessary to the performance of the defendants’ statutory duties,” or that the stopped work “would not interfere with the performance of the defendants’ statutory duties.”
Appellate arguments have been scheduled for May 16. But Hill sources expressed concern to the Prospect that Vought would drive a Mack truck through that loophole. And sure enough, it took less than four days for the assessment to be made that CFPB’s statutory duties could be fulfilled with a 90 percent reduction in staff.
Attorneys for the National Treasury Employees Union, which represents CFPB workers, immediately asked Judge Jackson to force the agency leadership to show cause as to how the mass firing didn’t violate the preliminary injunction. As the filing notes, entire CFPB offices with statutory responsibilities were fired or left with one person. There are at least 87 legal responsibilities under the purview of CFPB in the U.S. code, 13 of which require specific offices. The RIF leaves around 200 employees in place to carry out those 87 responsibilities, which stretches credulity.
“It is unfathomable that cutting the Bureau’s staff by 90 percent in just 24 hours, with no notice to people to prepare for that elimination, would not “interfere with the performance” of its statutory duties, to say nothing of the implausibility of the defendants having made a “particularized assessment” of each employee’s role in the three-and-a-half business days since the court of appeals imposed that requirement,” the motion states.
Judge Jackson has called for an 11:00 a.m. hearing on the matter, asking CFPB to bring someone “with personal knowledge of the scope of the Reduction in Force (“RIF”) and the decision to implement it.” She also asked for copies of all leadership communications sent to CFPB staff this week, samples of the reduction in force notice, and a list of all fired employees.
On Wednesday, acting chief legal officer Mark Paoletta sent a memo to staff outlining new and significantly scaled-down priorities for the agency. Paoletta said that supervision would be cut 50 percent, with a greater focus on large depository institutions and restitution to consumers, particularly servicemembers and veterans. Specific topics that would have the greatest priority include mortgage fraud, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, fraudulent overcharges, and breaches of personal information that lead to a loss to consumers.
Deprioritized topics, left to be picked up by the states, include discrimination uncovered through statistical analysis, protection of “justice involved” individuals, medical debt, peer-to-peer lending, student loans, remittances, consumer data, and digital payments. (The latter has been a long-sought goal of the Trump administration and especially Elon Musk, who wants to add digital payments to his microblogging site X.)
Some of the deprioritized topics, like student loans, are statutory; the agency must assist borrowers with complaints about their loans. The Office of Fair Lending and Equal Opportunity must be maintained to enforce federal anti-discrimination laws and report to Congress.
But even the functions of the CFPB that Paoletta names as priorities lack staff to carry them out, according to former employees. For example, all of the supervision attorneys who work on the Fair Credit Reporting Act were laid off, despite the FCRA being listed among the priorities. Given the drastic nature of the cuts, this is likely the case in numerous other areas.
There are at least 87 legal responsibilities under the purview of CFPB in the U.S. code, 13 of which require specific offices. The RIF leaves around 200 employees in place to carry out those 87 responsibilities.
The Office of Research also saw all its employees fired, and this includes the team that manages the Average Prime Offer Rate (APOR) tables, a critical tool for mortgage markets. As the Prospect has previously written, CFPB must update these tables every week, which relate to the average interest rate offered on a mortgage, to let lenders know whether they are issuing “qualified mortgages” that are immune from prosecution if the loan goes bad. If the APOR tables are not updates, uncertainty can set in, purchasers of loans on the secondary market could balk at buying, and the entire mortgage market could seize up.
In February, when Vought issued a mass stop-work order, it was unclear who would update the APOR tables. CFPB informed the Prospect at that time that Assistant Director of Research Jason Brown was authorized to continue publication of the tables. One source I communicated with said Brown was likely still at the agency. However, everyone with access to the APOR code, the knowledge to run the code, and the site where the tables are posted were laid off. The source doubted that the tables could get posted without this support staff.
CFPB did not respond to multiple questions about APOR and other issues.
The agency is statutorily required to maintain an Office of Research, which is supposed to analyze the latest consumer financial market developments, access to credit for underserved communities, mortgage loan performance, consumer financial education, and much more. CFPB is also support to make certain data on mortgage issuance available to the public under the Home Mortgage Disclosure Act. Later in the year, CFPB is required to calculate various thresholds under the Truth in Lending Act, again to let lenders know the ranges for qualified loan types.
It’s hard to imagine how any of these duties, many statutorily required and many absolutely vital for market functioning, will get done with a skeleton crew at CFPB.
“The agency can’t do its job of helping Americans who get scammed by big banks and giant corporations,” said Sen. Eizabeth Warren (D-MA), mastermind of the agency, in a statement. Dismantling the CFPB in the face of a court order blocking an illegal shutdown is yet another assault on consumers and our democracy by this lawless Administration, and we will fight back with everything we’ve got.”
Vought appeared eager to implement the RIF before Jonathan McKernan, the former Federal Deposit Insurance Corporation official nominated to run the CFPB, received Senate confirmation. Senate Banking Committee chair Tim Scott (R-SC) revealingly stated last week that “we… wanted to shrink the CFPB down to the right size” prior to McKernan’s arrival.
Stopping discretionary enforcement and bowing to industry, like by switching sides and joining a bank-led lawsuit to nullify the $8 credit card late fee cap, is frankly expected from a conservative CFPB. But gutting the agency to the degree we’ve seen has serious legal, statutory, and macroeconomic implications.
We’ll see if the agency can explain any of that at the 11:00 a.m. Friday hearing. In a previous hearing before she issued the preliminary injunction, Judge Jackson expressed “little confidence that the defense can be trusted to tell the truth about anything.”
This story will be updated with the results of that hearing.
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