Dismantling The CFPB Officially On Hold

In a lengthy decision that highlighted the CFPB’s very public efforts to dismantle the CFPB from within, the District Court for the District of Columbia granted a motion for preliminary injunction designed to preserve the CFPB pending litigation on the merits with the National Treasury Employees Union (NTEU). The Government has already appealed, seeking an emergency stay of the district court’s order. While that litigation continues to play out, the Bureau and Congress have been busy taking other steps to unwind actions taken by prior directors of the Bureau.

Court Preliminarily Enjoins Further Efforts to Dismantle the CFPB

After two days of testimony and evidence, the Court found that NTEU had “overwhelmingly” met its burden to be entitled to a preliminary injunction. As the Court explained:

The evidence presented in connection with the motion – the testimony of the agency’s Chief Operating Officer and other witnesses, and the agency’s own documents, produced by both sides – showed that Russell Vought, the Acting Director of the CFPB, ordered all employees to stop work on February 10, 2025. As of that date, the defendants were fully engaged in a hurried effort to dismantle and disable the agency entirely – firing all probationary and term-limited employees without cause, cutting off funding, terminating contracts, closing all of the offices, and implementing a reduction in force (“RIF”) that would cover everyone else. These actions were taken in complete disregard for the decision Congress made 15 years ago, which was spurred by the devastating financial crisis of 2008 and embodied in the United States Code, that the agency must exist and that it must perform specific functions to protect the borrowing public. The elimination of the agency was interrupted only because plaintiffs sought and obtained the Court’s intervention on the day the overwhelming majority of the employees were going to be fired.

The Court also declined to give any credence to the Bureau’s attempt to walk back some of these pronouncements in the face of the pending lawsuit, dismissing those efforts as mere “window dressing.” Ultimately, the Court concluded that absent an injunction, “there is a substantial risk that the defendants will complete the destruction of the agency completely in violation of law well before the Court can rule on the merits, and it will be impossible to rebuild.”

The Bureau Continues to Unwind Past Actions

In the past month or so, the Bureau has been busy dismissing numerous enforcement actions brought under prior directors of the CFPB. But Acting Director Vought has begun to go a step further, looking to vacate a prior settlement the CFPB reached with a mortgage creditor and refund it the six-figure penalty it paid. In July 2020, the CFPB brought an action in federal court against a nonbank retail-mortgage creditor for allegedly violating the Equal Credit Opportunity Act (ECOA) and the Consumer Financial Protection Act (CFPA). Specifically, the Bureau alleged that the company discouraged African-Americans from applying for loans through its marketing materials and engaged in illegal redlining by engaging in acts or practices that “discouraged prospective applicants living in African-American neighborhoods in the Chicago MSA from applying to [the company] for mortgage loans, including by making discouraging statements during its weekly radio shows and podcasts through which it marketed its services… .”

After engaging in years of litigation, the parties ultimately entered into a Stipulated Final Judgment and Order in November 2024. As part of the settlement, the mortgage creditor agreed to take affirmative steps to ensure its business practices complied with ECOA and pay a $105,000 civil monetary penalty to the Bureau.

Now, however, the Bureau seeks to unwind its “abusive” and “unjust” case against the mortgage creditor. According to Acting Director Vought, the “CFPB abused its power, used radical ‘equity’ arguments to tag [the mortgage creditor] as racist with zero evidence, and spent years persecuting and extorting them – all to further the goal of mandating DEI in lending via their regulation by enforcement tactics.”

The Bureau also announced that it would not prioritize enforcement of its Payday Lending Rule that had been on hold for years as a result of industry-led litigation. Notwithstanding this, states, under section 1042 of the Dodd-Frank Act, have authority to enforce certain consumer protection statutes and CFPB-issued rules, like the Payday Lending Rule. Since the states can operate to fill any void left at the federal level, it is not clear what impact, if any, the Bureau’s de-emphasis on enforcement of the rule may have outside of limiting its own enforcement.

Congress Utilizes the CRA to Unwind the Overdraft Fee Rule

Late last week, the Senate, on a party line vote, passed a Congressional Rule Act (CRA) resolution offered by Sen. Tim Scott (R-SC) that would unwind the CFPB’s overdraft fee rule. The CFPB’s overdraft fee rule would require banks and credit unions with more than $10 billion in assets to provide Truth-in-Lending Act disclosures for such loans and cap the overdraft fee to $5.00. The CRA resolution now goes to the House where, if passed by a simple majority, it moves to President Trump for final approval. Both of those moves are expected.