The Consumer Financial Protection Bureau has restarted enforcement activity on a limited basis, with a focus on violations involving service members and joint cases with state attorneys general, according to sources at the bureau and internal communications.
The CFPB had 37 pending enforcement cases when the Trump administration took over the bureau. In February, acting CFPB Director Russell Vought halted all enforcement actions and quickly dismissed at least nine cases, including lawsuits against
Meanwhile, nearly a dozen cases filed under former CFPB Director Rohit Chopra during the Biden administration remain on hold for at least another month, including lawsuits against
There appears to be no theme among the lawsuits that are moving forward.
"The bureau is disengaging from litigation and enforcement actions, but there has yet to be a widespread effort to replace any of that with a regulatory roadmap," said Jonathan Pompan, a partner and chair of the consumer financial services practice group at Venable LLP.
While enforcement has returned on a limited basis, supervision has ground to a halt.
Examinations are not being conducted, employees say, even though supervision of banks and non-depositories are legally required functions. The upheaval has created uncertainty for financial firms that were in the middle of exams when the Trump administration put all of the agency's employees on administrative leave.
"The CFPB is operating essentially at a skeleton staff level," said Meredith Osborn, a partner at the international law firm Arnold & Porter, and a former CFPB enforcement attorney. "This is a time of great uncertainty and upheaval. Companies that want to figure out what is their path forward may have a harder time in this environment."
Vought recently ordered enforcement attorneys, through a proxy, to restart actively working on seven cases. Lawsuits against online lender
After the National Treasury Employees Union sued Vought in February to halt mass firings and efforts by the Trump administration to dismantle the agency, enforcement attorneys have been restricted from reaching out to opposing counsel, according to interviews with more than a dozen CFPB employees. Enforcement attorneys must seek prior approval for any substantive legal filings from Vought or Mark Paoletta, the CFPB's chief legal officer, employees said.
Only recently have CFPB employees been taken off administrative leave
At the heart of the legal battle, experts say, is the Trump administration's misreading of the statute that created the CFPB.
In legal filings, the Department of Justice claims that the agency's core congressional mandates — supervision, enforcement and rulemaking — are discretionary functions that the CFPB is not required to perform under the Dodd-Frank Act.
For example, the DOJ wrote
David Silberman, senior advisor at Financial Health Network and a former associate director at the CFPB, described in detail the various sections of Dodd-Frank that establish the requirements for the bureau to supervise, enforce and enact rules.
"Rulemaking, supervision, and enforcement are all statutorily required functions which the director is legally required to undertake," Silberman said.
Dodd-Frank mandates that the CFPB engage in enforcement "where appropriate" and lists "primary functions" of the CFPB as including "supervising covered persons for compliance with federal consumer financial law and taking appropriate enforcement action to address violations of Federal consumer financial law."
Taking a cue from the administration, companies still in litigation have asked for their cases to be dismissed by claiming in court filings that the agency has either terminated or placed on leave attorneys in their cases. Judges have even responded by saying they will consider dismissing cases due to the CFPB's "failure to prosecute."
Separately, union employees have filed a grievance, which is headed to arbitration with the CFPB, over the lockout from the agency's headquarters amid thwarted efforts to get their personal belongings back. Some managers and non-union employees have been allowed to return to the headquarters, but NTEU bargaining members have been refused entry while the union fights for the agency's survival.
During the first Trump administration, the CFPB under Mick Mulvaney carefully reviewed open cases for weeks and put a pause on some. But he did not just dismiss cases outright, Pompan said, and even brought donuts to the office on his first day in an effort to establish some connection with the staff.
"Clearly this is a very different approach," said Pompan, who recently drove by the bureau's headquarters at 1700 G Street.
"If you drive by, the sign is off the door, there's no signs of life," he said. "If there's no office, no staff and no inclination, what's after that?"
