The CFPB just dropped a bunch of its own lawsuits as the agency's future hangs in limbo

Yahoo

27-02-2025

The Consumer Financial Protection Bureau abruptly dropped five of its own lawsuits against companies it had accused of victimizing customers on Thursday as the political and legal battle over the Trump administration's efforts to radically downsize the agency raged on.
The abandoned cases included actions against major corporate names such as Capital One Financial, the country's ninth-largest bank, and the real estate referral site Rocket Homes. Others targeted a major student loan servicer and a pair of consumer lenders.
Activity at the CFPB has been largely frozen thanks to a stop-work order by Trump officials, who appear to be targeting the watchdog for potentially crippling cuts. Last week, it dismissed a case against the online lender SoLo Funds, raising concerns among Democrats and consumer advocates that the administration might begin unwinding much of the agency's legal docket.
'There are certainly indications that they intend to dismiss a large number of cases, if not all cases,' said Eric Halperin, who resigned as the CFPB's head of enforcement earlier this month after serving in the Biden administration. He noted that the agency had canceled its contracts with expert witnesses, who are essential to proving cases in court, while its work stoppage has made it impossible to move suits forward.
CFPB lawyers did not explain their decision to drop the cases in their court filings, and the agency did not respond to a request for comment. All five cases were dismissed with prejudice, meaning they could not be revived in the future.
The moves are in some ways unprecedented for the agency. Until this month, the CFPB had only ever dismissed one of its own lawsuits without first obtaining some sort of relief for consumers, former officials told Yahoo Finance. That occurred under the first Trump administration in 2018, when then-acting Director Mick Mulvaney ended a suit against the payday lender Golden Valley Lending. The case, however, was dismissed without prejudice, meaning it could have in theory been brought again.
Several of the suits that the CFPB moved to end on Thursday were filed under former Director Rohit Chopra after Trump's November election victory. The regulator sued Rocket Homes in December, alleging that it had illegally provided real estate agents with kickbacks in order to steer customers toward its sister lender, Rocket Mortgage. In early January, it sued Berkshire Hathaway-owned Vanderbilt Mortgage & Finance, a mobile home lender it accuse of illegally trapping customers in loans they couldn't afford to pay.
The CFPB filed its case against Capital One less than a week before Trump's inauguration, claiming the bank had cheated customers out of $2 billion by advertising a high-yield savings account that in fact paid very little interest.
Republicans and industry groups had criticized the timing of those suits as politically motivated, arguing that Chopra was attempting to bring controversial cases at the last moment before the new administration could have a chance to replace him atop the agency. Many expected that those suits might be dropped.
But not all of the cases the agency has dismissed were filed during the lame duck. On Thursday it moved to scrap a May lawsuit against the Pennsylvania Higher Education Assistance Agency, a student loan servicer it accused of collecting on debts that had been discharged in bankruptcy. It also ditched an August 2023 case against Heights Finance, a high-cost installment lender the agency said had abused borrowers.
In theory, some states attorneys general could try to file their own modified versions of the dismissed lawsuits, since they're statutorily empowered to enforce the same consumer laws as the CFPB. But it's unclear how many would have the manpower or resources to do so.
The move to drop cases comes amid a high-stakes legal battle over the CFPB's future. Last week, a federal judge temporarily blocked Acting Director Russell Vought from laying off any additional staff, after a union representing the agency's employees filed suit claiming he planned to fire as much as 95% of its workforce. In a filing this week, Vought claimed he simply intended to run a 'more streamlined and efficient bureau' capable of meeting its 'statutory responsibilities.'
The CFPB, which was created as part of the 2010 Dodd-Frank Act in response to the housing bust and financial crisis, has long been a target for Republican critics, who've accused it of using heavy-handed tactics and stretching its legal authority. But it has become a particular focal point for Elon Musk and his DOGE push; the billionaire has said he wants to 'delete' the CFPB.
On Thursday, Democratic Sen. Elizabeth Warren pushed Jonathan McKernan, Trump's nominee to permanently head the bureau, on whether the agency would continue to enforce the law under his leadership.
"I'm fully committed to following the law fully and faithfully. That includes each of the statutes,' he said.
Jordan Weissmann is a senior reporter at Yahoo Finance.