The direction of the CFPB under the Trump Administration remains murky after several key developments in April, including in court cases involving staffing at the agency. In mid-April, acting leadership at the bureau issued a memo laying out the priorities for the agency, laying the groundwork for a significant reduction in staff, with a realignment of its supervision and enforcement priorities. The bureau leadership intends to overall reduce participation in supervisory exams, reducing all by around 50%, and shifting focus to depository institutions and away from non-depository institutions which had been subject to about 60% of the bureau’s focus recently. The focus will instead be on actual damages experienced by consumers, which can be measured and are material. Overall, the memo outlines a step back in the involvement in the industry by the CFPB, relying more on states to fulfill supervisory and enforcement needs.
Litigation about staffing at the CFPB continues with plans by the new leadership at the bureau to layoff nearly all of the personnel, a move currently put on hold by federal courts. The Department of Government Efficiency first took aim at the bureau back in February with plans to significantly reduce staff, indicating plans to keep only the minimal staff necessary to perform statutorily-required duties of the agency. That action was immediately challenged in court by the union for CFPB employees, which resulted in a temporary injunction halting the reduction in staff. That injunction however was modified by the Circuit Court of Appeals for the District of Columbia in early April allowing bureau leadership to terminate employees, but only after a “particularized assessment” that the position was not necessary to fulfill statutorily required functions of the bureau.
After that modification to the district court’s injunction, CFPB leadership proceeded, within about 24 hours, to terminate employment of nearly 1500 of the almost 1700 staff at the bureau. The employees’ union again challenged the planned reduction in staff claiming impossibility for the bureau leadership to have complied with the requirement for a particularized assessment of each planned termination of staff. Again, the district court applied a new injunction to halt the terminations, which was again appealed to the Circuit Court of Appeals for the District of Columbia, who then upheld the new temporary injunction ordered by the district court. As a result, the planned terminations of nearly 1500 staff currently remain on hold pending resolution of these court matters. Should these terminations be allowed to take effect, there would be only about 200 employees left at the agency. The CFPB is required under the Dodd-Frank Act to maintain certain offices and functions related to consumer protection. The question remains, if the CFPB can still carry out its statutorily-mandated functions if the job cuts proceed.
In another shift of priorities, the CFPB and other federal agencies, such as the U.S. Department of Housing and Urban Development (HUD) have recently been directed by Executive Order to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution.” The Executive Order also instructs that the Attorney General shall determine if federal preemption can prohibit the enforcement of related state laws.
DocMagic will continue to monitor CFPB related actions and provide more information as it becomes available.
