Al Drago/Bloomberg
In a major win for the Trump administration, a federal appeals court on Friday ruled against the Consumer Financial Protection Bureau’s union, allowing the bureau’s acting Director Russ Vought to fire up to 90% of bureau’s staff.
By a 2-1 vote, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit found that the CFPB director can fire union employees through a mass reduction-in-force, or RIF. The court found against the National Treasury Employees Union, which
The appellate panel decided that Vought’s effort to conduct RIFs did not constitute a final agency action—or even a policy—and therefore, was not reviewable by the courts under the Administrative Procedure Act. The union had alleged that Vought acted in an “arbitrary and capricious” manner when he issued a RIF, claiming it was in violation of the APA, which requires reasoned explanations when agencies make regulatory changes.
The ruling lifts a district court’s preliminary injunction that kept the CFPB from issuing a reduction-in-force, or RIF. The union has a week to file an appeal or petition for a rehearing of the case to the full DC Circuit.
“This challenge is not viable. It cannot be brought under the APA because that statute provides a cause of action to challenge discrete, final agency action, which claims here do not target,” Judge Gregory G. Katsas wrote. “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 established in the Civil Service Reform Act.”
Katsas was joined by Judge Neomi Rao, who was also appointed by Mr. Trump. Judge Cornelia Pillard, an Obama appointee, dissented.
Jennifer Bennett, who defended the CFPB’s union, said the ruling does not go into effect immediately.
“If this decision is allowed to stand, it will shift the balance of power toward corporations at the expense of American families’ financial security,” said Bennett, a principal at the law firm Gupta Wessler LLP, in an emailed statement. “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.”
Sen. Elizabeth Warren, D-Mass., who founded the CFPB, said Trump administration “cannot yet resume its illegal attempt to shut down the CFPB,” because the panel’s decision won’t take effect until the union has a chance to ask the full D.C. Circuit to review the case.
“Today’s divided panel decision willfully ignores the Trump Administration’s unprecedented and lawless attempt to destroy an agency created by Congress that has helped millions of families across the country. As Judge Pillard emphasized in her dissent, the evidence against Administration officials is ‘damning’ and the majority hid behind technicalities to let them off the hook,” Warren said in a press release. “The fight continues for the agency that has returned over $21 billion to Americans who were scammed or cheated by big banks and giant corporations.”
Still, CFPB employees have been bracing for RIF notices to be issued by Vought or Chief Legal Officer Mark Paoletta, who both have primary jobs at the Office of Management and Budget. The CFPB had 1,755 employees in February and more than 250 staffers have retired, taken another job or taken a buyout under the so-called “Fork in the Road,” offered early in the Trump administration.
The court did not address how many employees are needed for the CFPB to enforce the 18 federal consumer finance laws that it oversees. By statute, the CFPB has exclusive supervisory and primary enforcement authority over the largest banks with more than $10 billion assets as well as nonbanks.
In her dissent, Pillard wrote: “Neither the government nor the majority seriously disputes that, if we accept the district court’s findings of fact, Defendants’ actions violated both the CFPB’s organic statute and the constitutional separation of powers.”
“My colleagues nonetheless vacate the preliminary injunction because they deem the decision to unilaterally abolish the CFPB not a type of agency action we are authorized to review,” she wrote. “That constricted view of our statutory and equitable power contravenes statutes, precedent, and basic principles of our constitutional government.”
The appeals panel’s opinion is not the last word in the case. The National Employees Treasury Union is expected to appeal en banc to the full DC Circuit.
In April, the CFPB sent reduction-in-force notices to roughly 1,500 employees across the agency, which were paused by a district court, and the layoff notices rescinded. However, the CFPB was ordered to make “a particularized assessment” to determine which employees were “unnecessary” to fulfill the bureau’s legally-mandated functions.
At the time, the same appeals court’s panel sided, in part, with the Trump administration by allowing some firings at the CFPB to resume. The panel had narrowed a district court’s
Vought had appealed the injunction claiming it restricted his ability to reorganize and reduce the CFPB’s staff. The Department of Justice, defending Vought, has argued that a district court injunction was an unwarranted intrusion on the executive branch’s authority to manage the CFPB, and that the union’s claims lacked legal and factual basis.
The CFPB has not responded to requests asking about the number of employees currently being paid by the agency not to work.
At an evidentiary hearing in March, a lawyer for the Justice Department sought to portray the Trump administration’s actions as a normal part of a government transition, saying that CFPB employees were “against the president’s agenda.”
Vought issued a stop-work order in February, closing the agency’s Washington, D.C. headquarters, cancelling more than 100 contracts for all expert witnesses, cybersecurity and research. This brought on questions from the union about whether the CFPB was performing legally-required functions. Vought has not commented publicly on the CFPB.
Many CFPB employees have said they took President Trump at his word when he said in February that he wanted to “get rid of” the CFPB, which would directly contradict the text and purpose of the Dodd Frank Act.
The CFPB is subject to the union’s collective bargaining agreement. Once the list of people to be fired has been determined, the employees are supposed to be given 60 days notice.