- Key Insight: Acting CFPB Director Russell Vought claims the agency will run out of funding by year-end and cannot pay employees, so it is transferring its remaining litigation duties to the Justice Department.
- What's at Stake: Vought was sued by the National Treasury Employees Union in March and a district court issued a preliminary injunction that prohibits the bureau from firing employees through a reduction-in-force.
- Forward Look: The bureau is responsible for publishing the Average Prime Offer Rate and plans to outline a new method for industry to calculate APOR for themselves — another sign the bureau is shutting down.
The Consumer Financial Protection Bureau plans to transfer all of its litigation activities to the Department of Justice and expects to furlough all in-house enforcement attorneys, despite a preliminary injunction that prohibits the agency from mass firings.
At an all-hands meeting held late Thursday, Michael Salemi, the CFPB's principal deputy enforcement director and acting director of enforcement, told enforcement staff that more than 100 people would be furloughed because the CFPB is going to run out of money, according to several people on the call. All open cases in the enforcement division, as well as work by the legal division, will be transferred to the Justice Department, Salemi told staff on the call.
The announcement comes after Acting CFPB Director Russell Vought said last week that the CFPB will only have enough funds to operate through year-end. The CFPB said in
The move drew condemnation from Sen. Elizabeth Warren, the ranking member of the Senate Banking Committee.
"The Administration is transferring away all of the CFPB's active litigation, critical work that the CFPB does to return billions of dollars directly to Americans," Warren said in a press release. "Donald Trump and Russ Vought are racing to shut down the CFPB while their lawyers tell the courts the opposite."
Vought is looking to dismantle the CFPB under a novel legal theory that because the Federal Reserve System has been unprofitable since 2022, the CFPB cannot be funded. Notably, the CFPB has been funded for the past two years even though the Fed has been unprofitable.
The CFPB currently is operating under an injunction in a court case brought in February by the National Treasury Employees Union, to stop mass layoffs. In March, District Court Judge Amy Berman Jackson issued a preliminary injunction that required the preservation of the agency's operations and employees. The injunction put a halt to a stop-work order and required the reinstatement of terminated employees, the continuation of the bureau's statutory functions, and the maintenance of its data.
At the all-hands meeting on Thursday, Salemi told employees that he had limited information from senior CFPB officials. He said the enforcement team likely will be furloughed by year-end. A few top officials may have the opportunity to work for DOJ, people who heard the call said.
CFPB Union President Cat Farman called the move to end funding for the CFPB the "latest illegal power grab," by Vought. She also said that enforcement attorneys are concerned that the CFPB will dismiss the remaining 13 cases currently in litigation.
But Farman went much further by calling on Congress to remove Vought from the agency.
"If Vought is going to keep refusing to fund [the] CFPB in order to illegally dismantle the agency, while he wastes over $5 million of CFPB's dwindling budget on personal bodyguards, then it's time for Congress to impeach and remove Russell Vought from power."
Vought, who is also the director of the Office of Management and Budget, and is a key architect of Project 2025, the Trump administration's blueprint for reducing the federal government, has billed the CFPB nearly $5 million for
The CFPB had to take a circuitous legal route to explain why Vought would not request funding for the agency.
Last week the Justice Department
The CFPB said that DOJ's Office of Legal Counsel "made this conclusion on the basis that the Federal Reserve System currently lacks any 'combined earnings' from which the Bureau may draw funding, as required by Dodd-Frank. OLC opinions are binding upon Executive Branch agencies including the Bureau."
Many expect more litigation from the moves. In the meantime, the CFPB is making several changes to prepare for a shutdown.
Separately, CFPB officials are creating a contingency plan for mortgage lenders to work out the Average Prime Offer Rate, or APOR, if the agency shuts down. The CFPB calculates and publishes weekly APOR rates, which providing a benchmark and stability for mortgage lending, and are used to determine Ability-to-Repay rules.
CFPB officials are planning to publicly outline a new method for calculating APOR that would allow the industry to calculate it for themselves by providing an alternative use of readily-available data, people familiar with the matter said. It is unclear yet whether the approach will be accepted by lenders. One expert said the secondary market for mortgage credit could shown signs of strain because of "very real private liability concerns."
The change in APOR, the refusal to request funding as well as recent proposals to change Biden-era rules suggest that Vought preparing for a future where the CFPB is not fully-functioning.
Last week the CFPB issued two proposed rulemakings — making major changes to the 1071
