Court Allows Trump Administration to Proceed with Mass Layoffs at Consumer Financial Protection Bureau

A three-judge panel of the United States Court of Appeals for the District of Columbia Circuit has ruled that the Trump administration can proceed with its planned reduction in force at the Consumer Financial Protection Bureau (CFPB). In a 2-1 decision, the court vacated a preliminary injunction that had previously blocked the layoffs, allowing the administration to continue restructuring the independent agency.

The April mid-term layoff notices sent to over 1,400 CFPB staffers left about 200 employees remaining at the bureau. Judge Gregory Katsas, writing for the majority, stated that the district court lacked jurisdiction to consider claims related to employment losses, which must proceed through the Civil Service Reform Act’s specialized-review scheme.

In her dissenting opinion, Judge Nina Pillard argued that it was untenable to hold that Congress intended the agency’s continued existence to be a matter of presidential edict. Pillard, who was nominated by former President Obama, expressed concern that without the district court’s intervention, the CFPB would have likely ceased to exist by the end of March.

Established in response to the 2008 financial crisis as part of the Dodd-Frank Act, the CFPB has numerous responsibilities mandated by Congress, including regulating consumer financial products and services and operating an office that collects and monitors consumer complaints. The bureau has faced criticism from some in the Trump administration, Silicon Valley, and Wall Street for overreach in its regulation.

The National Treasury Employees Union, which represents CFPB employees, argues that the Trump administration is unlawfully dismantling the agency. In a brief, the union’s attorneys claimed that an agency of approximately 200 staffers would be unable to fulfill its Congressionally-required duties.

In April, following a ruling allowing for a reduction in force, the administration swiftly moved to fire most of the bureau’s staff. CFPB chief legal counsel Mark Paoletta wrote that the reduced size of the agency would allow it to better align with the new leadership’s priorities and management philosophy. Paoletta also outlined plans to shift resources away from enforcement and supervision that could be handled by the states, while focusing more on banks and mortgage fraud, and deprioritizing areas including medical debt, student loans, peer-to-peer lending, and digital payments.

Federal Judge Amy Berman Jackson initially blocked the layoffs, but her injunction was overturned by the appeals court in late April. The CFPB has since dropped a number of cases it was litigating and deprioritized other enforcement efforts. With the passage of the One Big Beautiful Bill Act in early July, the CFPB’s budget was cut nearly in half, though it retains the ability to request funds from Congress.

An appeal by the workers’ union to the full DC Circuit and eventually to the U.S. Supreme Court is possible.