CFPB’s acting director was illegally appointed: Lawsuit

Consumer and employee groups are seeking a temporary restraining order against Russell Vought, the acting director of the Consumer Financial Protection Bureau, saying he was illegally appointed and that his actions to dismantle the agency have usurped the role of Congress.

According to a lawsuit filed Thursday, Trump appointed Vought as acting director “without the advice and consent of the Senate” and under the guise of the Federal Vacancies Reform Act, which permits temporary appointments with the Senate’s consent in cases where the previous holder of a Senate-confirmed seat dies, resigns or is otherwise unable to perform office duties. 

On Feb. 1, Trump fired the previous CFPB director, Rohit Chopra.

“Chopra did not die, he did not resign and he was not unable to perform the functions and duties of the office,” the lawsuit said. “The president’s appointment of Defendant Vought as acting director of the CFPB is therefore unconstitutional and [he] has no power to direct the agency.”

The lawsuit, which was filed in the U.S. District Court for the District of Columbia, is among the many dozens of suits piling up against the second Trump administration, and the second one in as many days against the CFPB and Vought.

On Wednesday, Democracy Forward filed a lawsuit on behalf of the city of Baltimore and the nonprofit group Economic Action Maryland Fund, arguing that Vought’s recent decision to not draw down the bureau’s quarterly funding was illegal.

“It’s appalling to call to eliminate an entire agency that is protecting consumers,” said Lisa Gilbert, co-president of Public Citizen, one of the groups representing the plaintiffs in the Thursday lawsuit. “We think it’s illegal and unconstitutional to neuter an agency that is enshrined in law.”

Vought, who was named acting director on Feb. 7, has moved swiftly to overhaul the CFPB, which was launched in 2011 to enforce federal consumer financial laws. In the past week, he told all bureau staff to stop working and “stand down,” closed the bureau’s headquarters in Washington, D.C., terminated 150 CFPB contracts and fired employees, including about 70 probationary workers who had been hired during the Biden administration, the lawsuit said.

Vought is a key architect of Project 2025, the conservative policy blueprint for overhauling the federal government that called the CFPB “unconstitutional.” In addition to his role at the CPFB, Vought is also the newly confirmed director of the Office of Management and Budget.

The Thursday lawsuit was filed by the National Treasury Employees Union, the National Consumer Law Center, the National Association for the Advancement of Colored People, the Virginia Poverty Law Center, the CFPB Employee Association and Eva Steege, an 83-year-old Lutheran pastor with cancer, who was working with the bureau to renegotiate her student loan debt.

“Defendants’ actions to eliminate the CFPB exceed executive authority, usurp legislative authority conferred upon Congress by the Constitution, defendant Vought was not lawfully appointed, and his actions are ultra vires and should be enjoined,” the suit states.

The National Treasury Employees Union has more than 775 members who’ve worked at the CFPB, including some who have already been fired, according to the lawsuit. The National Consumer Law Center has had “multiple” contracts with the CFPB canceled, which will “cost NCLC thousands of dollars.” And the NAACP, which has been working to shield people who live in the wildfire-ravaged community of Altadena, California, from predatory financial practices, is now being forced to halt its collaboration with the bureau, the lawsuit argues.

The suit calls on the court to declare that dismantling the CFPB is unlawful and requests it to issue an injunction barring Vought from implementing or complying with directions to halt work, unless authorized by Congress. It also calls for all bureau activities to immediately resume.

“Neither the President nor the head of the CFPB has the power to dismantle an agency that Congress established,” the lawsuit states. “By suspending the statutorily mandated activities of the CFPB, Trump and Vought’s shutdown of the CFPB runs afoul of core constitutional separation of powers principles, Congress’s express statutory directive, and the Administrative Procedure Act.”

The Administrative Procedure Act guards against agency actions that are considered “arbitrary and capricious,” and governs how federal agencies create and issue regulations.

The CFPB did not respond Thursday or Friday to a request for comment. The bureau’s public relations office has not responded to American Banker’s media requests since Feb. 3, when Treasury Secretary Scott Bessent began his brief tenure as the bureau’s acting director.

One CFPB employee who spoke on the condition of anonymity for fear of retaliation told American Banker that it feels like “our government has declared outright war on us.”

“We’re like sitting ducks and so helpless, while the rest of America is unaware of the battle, let alone the repercussions of the defeat of these agencies,” the bureau employee said.

Vought’s role at the CFPB is not permanent. On Tuesday, the White House nominated former Federal Deposit Insurance Corp. board member Jonathan McKernan to become the next CFPB director. McKernan, who announced his exit from the FDIC on Monday, must still be confirmed by the Senate.

Just what McKernan does with the bureau — assuming he does get confirmed — remains to be seen.