Appeals judges prod Trump admin, union over CFPB wind-down

Yahoo

16-05-2025

By Douglas Gillison
(Reuters) -Federal appeals court judges in Washington wrestled Friday with the extent to which they could instruct the Trump administration to operate the government's consumer finance watchdog agency, which the White House this year has sought to decimate if not shut down entirely.
The three-judge panel is considering a government appeal to reverse a March lower-court ruling that temporarily blocked plans to fire virtually all workers at the U.S. Consumer Financial Protection Bureau.
Lawyers for a worker union originally in February sued to halt efforts to dismantle the agency, asking the courts to prevent the administration from ordering CFPB employees to not perform work required by law.
Though it was unclear from their questions on Friday how the judges intended to rule, the outcome is likely to decide the future of the CFPB, a watchdog created after the global financial crisis to police consumer financial products and protect American consumers against predatory business practices.
Republican President Donald Trump and business moguls like billionaire Elon Musk have accused the agency of politicized enforcement and said it should be eliminated.
Democrats, like Senator Elizabeth Warren, who championed the creation of the CFPB, criticized Republican attempts to weaken the agency. Earlier this year, Warren said no one other than Congress could dismantle the agency that has paid $21 billion in financial restitution to thousands of Americans.
Deputy Assistant Attorney General Eric McArthur told the court that, while the administration intended to keep the CFPB operating in some form as required by law, it was within the government's power "to radically downsize this agency, to strip it down, as it were, to the statutory studs."
"That is a lawful policy," he said, and "not for the courts to review."
So far, the appeals court has differed to a degree with the Trump administration's actions at the CFPB. After initially finding that the lower court's injunction went too far, and allowing targeted staff reductions, the panel then reversed course after the CFPB again attempted mass dismissals last month.
Jennifer Bennett, a lawyer arguing for a CFPB workers union and consumer advocacy organizations, rejected the government's argument that officials had made no final decision to close the agency and so the matter could not be reviewed under federal laws that control government actions.
Bennett pointed to emails and testimony she said showed the administration had decided to shut down the CFPB -- in one case telling employees to return to work but separately issuing text messages with the opposite instruction -- and was only stopped in its tracks by the courts.
"It cannot be that, if an agency is in the midst of executing a final agency action when the district court intervenes, that this is somehow no longer final," she said.
U.S. Circuit Judge Gregory Katsas, whom Trump appointed to the bench in 2017, said the case could put the courts in the difficult position of deciding what specific actions showed that an agency was meeting its legal requirements, such as maintaining a consumer complaint hotline.
"The court has to ask itself such imponderables as how many employees can the agency [dismiss] and yet ensure that the hotline gets answered," he said.
It was unclear when the appeals court would issue a decision.