In split decision, court clears Trump to restart CFPB mass firings

Business Standard

8 hours ago

A divided federal appeals court on Friday cleared US President Donald Trump to resume mass firings at the Consumer Financial Protection Bureau, ruling that a lower court had lacked jurisdiction in temporarily blocking this.
However, the Circuit Court of Appeals for the District of Columbia said on Friday that its decision would not take immediate effect, allowing lawyers representing CFPB workers and pro-consumer organizations to seek reconsideration by the full court of appeals, meaning dismissal notices were likely to have to wait for now.
The decision nevertheless imperiled the employment of perhaps 1,500 workers at the CFPB whose mass dismissals were blocked in April by a trial court, which found the attempted purge violated a March injunction temporarily halting the administration's efforts to shut the CFPB down.
Representatives for the CFPB did not immediately respond to requests for comment. However, Jennifer Bennett, an attorney for the plaintiffs, said the decision threatened to leave the public unprotected from the misdeeds of bad actors in the market for consumer finance.
“Without the full force of the Consumer Financial Protection Bureau - an agency Congress created specifically to protect consumers - millions will lose critical safeguards against predatory financial practices. If this decision is allowed to stand, it will shift the balance of power toward corporations at the expense of American families’ financial security," Bennett said in a statement without addressing plans for further appeal.
In their ruling, US Circuit Court Judges Gregory Katsas and Neomi Rao found that, despite factual findings that the Trump administration intended to destroy the CFPB, the lower court had acted outside its authority.
"We hold that the district court lacked jurisdiction to consider the claims predicated on loss of employment, which must proceed through the specialized-review scheme" under laws governing the civil service, the majority wrote. Other objections raised by the plaintiffs did not concern final decisions made by the agency and so could not be reviewed in court, wrote Katsas and Rao, both Trump appointees.
In a dissent, Circuit Judge Cornelia Pillard said the lower court had acted properly in blocking the Trump administration from eradicating the CFPB entirely as the lawsuit played out.
"But it is emphatically not within the discretion of the President or his appointees to decide that the country would benefit most if there were no Bureau at all," wrote Pillard, who was appointed by former President Barack Obama.
Two watchdog organizations, the Federal Reserve's inspector general and Congress's Government Accountability Office, launched investigations earlier this year into the Trump administration's actions at the CFPB.
Congress created the CFPB in the wake of the 2008 financial crash to police consumer finance industries whose activities generated the toxic assets underlying that crisis. Conservatives and industrial lobbies have long reviled the agency, accusing it of weighing on free enterprise and acting outside the bounds of the law to pursue politicized enforcement.
Trump officials have appeared to vacillate this year concerning their plans for the CFPB, with Trump and erstwhile adviser Elon Musk saying it should be eradicated outright, even though senior officials have said in court they plan to shrink the agency but let it live in some form as required by law.
Lawyers representing workers and consumer groups, however, rejected this, saying witness testimony showed top officials did not intend to maintain a functioning CFPB.
In court, they produced evidence and testimony showing the attempted mass dismissals of March and April were so widespread they completely vacated entire offices or left them so understaffed as to be incapable of performing functions required by law, lawyers for CFPB workers and consumer advocates said in court.