Consumer financial watchdog lays off most of its employees
The Consumer Financial Protection Bureau on Thursday moved to fire more than 1,000 of its remaining employees, according to two people familiar with the matter, defying a court order barring the Trump administration from terminating employees at the watchdog agency except for cause related to their individual performance.
Employees received memos from acting CFPB director Russell Vought saying they would have access to their work systems until 6 p.m. Friday and then be placed on administrative leave for a limited period.
President Donald Trump first attempted to dismantle the consumer watchdog in February as part of the government cost-cutting effort headed by Elon Musk. A federal judge last month temporarily blocked the administration from shutting down the CFPB pending the outcome of a lawsuit brought by the National Treasury Employees Union, which represents the agency’s roughly 1,700 workers.
As part of that judge’s order, the administration was also required to reinstate probationary employees and other staff initially fired in February. The order also barred the administration from issuing reduction-in-force letters to any CFPB employees.
The CFPB, which is empowered to crack down on unfair, deceptive and predatory corporate practices, has drawn ire from Republican lawmakers since it was created in the wake of the 2008 financial collapse. Republicans faulted the Biden-era CFPB for engaging in regulatory overreach with its attempts to remove medical debt from credit reports, crack down on bank overdraft fees and oversee efforts by Amazon, Google and other tech firms to offer digital payment services.
The layoffs were announced less than a day after the agency said it would slash its inspections of financial services companies in half and turn away from oversight of student loan, medical debt and digital payment issues, according to a memo sent to staff Wednesday from Mark Paoletta, the agency’s chief legal officer.
Paoletta’s message marked a sharp departure from priorities of past CFPB leadership but signaled the Trump administration’s intent to keep the consumer watchdog functional for some supervision and enforcement rather than eliminate it altogether. The memo said all past CFPB enforcement and supervision priorities had been rescinded.
Paoletta also said the CFPB would prioritize enforcement of “pressing threats to consumers, particularly service members and their families and veterans” and focus on “actual fraud” rather than attempts to shield consumers from making “wrong choices.” The bureau said it would limit its imposition of fines on companies, refrain from stretching its regulatory authority and focus its oversight primarily on large banks rather than nonbank institutions.