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The Trump administration has taken a sledgehammer to much of the federal government. But at the Consumer Financial Protection Bureau (CFPB), which is tasked with shielding Americans from the depredations of the financial industry, a bloodless coup threatens to obliterate an entire federal agency without a trace.
Within days of being confirmed, Treasury Secretary Scott Bessent ordered CFPB employees to suspend all enforcement actions, supervisory activity, and any rules not yet finalized, including one that would have capped credit card late fees at $8. Last week he handed the reins to Russ Vought, the newly confirmed head of the Office of Management and Budget (OMB). Vought immediately put the entire staff on administrative leave, locked them out of the office, and informed Congress that he was zeroing out the agency’s budget.
“CFPB RIP” tweeted Elon Musk, whose DOGE stooges had burrowed into the abandoned agency and were busily picking over its remains.
You can judge a man by the quality of his enemies
Conservatives have been gunning for CFPB since 2011 when Sen. Elizabeth Warren more or less willed it into existence.
The agency was established as part of the 2010 Dodd-Frank Act, a landmark consumer protection bill passed in the aftermath of the Great Recession to ensure that unregulated financial behemoths would quit crashing the economy at regular intervals. Since then, it has recovered more than $20 billion for consumers and crafted federal rules to protect Americans from getting ripped off.
The agency is despised by everyone from payday lenders, to credit card companies, to the goons at Project 2025. And Elon Musk, who would like to turn Ex-Twitter into a banking app which would be regulated by CFPB, is no fan either.
Trump seems rather confused about CFPB’s remit. On Monday, he suggested that “people all over the midwest” had come up and spontaneously shared stories of their lives being destroyed by an agency which can only regulate banks worth more than $10 billion.
But he does know that it’s the pet project of Warren — “a nasty woman, despite her phony beer commercial” — and so "we had to get rid of it.” (Watch below.)
Anticipating that CFPB would attract powerful enemies, Congress built some protections for the agency into the law that created it. For instance, it specified that the director would be appointed to a five-year term and could only be fired for malfeasance.
The Supreme Court invalidated that provision in a 2020 case called Seila Law v. CFPB, finding that it violated the separation of powers. But in 2022 the Court upheld CFPB’s funding structure in a case called CFPB v. Community Financial Services Association of America. In a 7-2 opinion, Justice Thomas wrote that it was fine for CFPB to be funded through the Federal Reserve, so as to protect it from being zeroed out by Congress, thwarting conservative dreams of toppling the agency by judicial decree.
When entropy fails, Republicans resort to chaos
After efforts to kill CFPB in court ran aground, Republicans are now trying to strangle it through a series of wildly illegal actions aimed at making it impossible to resuscitate the bureau even if the Supreme Court eventually orders them to do so.
Most obviously, the president cannot simply abolish a statutorily-created agency by executive fiat. If Republicans want to do away with CFPB, they can repeal Dodd-Frank — they control both houses of Congress and the White House! But until they do, the law imposes affirmative obligations on the agency to do specific things.
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For instance 12 U.S. Code § 5493 says that “the Director shall establish an Office of Service Member Affairs, which shall be responsible for developing and implementing initiatives for service members and their families intended to educate and empower service members and their families to make better informed decisions regarding consumer financial products and services.” That’s a response to payday lenders preying on members of the military, with cash-checking outlets strategically located near bases. And the language of the statute says that the director of OMB “shall” do it, so it’s non-discretionary.
In fact, there are multiple “shall” clauses obligating the director to hire staff to research and report on things like “access to fair and affordable credit for traditionally underserved communities,” “experiences of traditionally underserved consumers, including un-banked and under-banked consumers,” and “consumer awareness and understanding of costs, risks, and benefits of consumer financial products or services.” So Vought simply telling employees to “stand down” and do no work is neither tenable nor legal.
Moreover, Vought immediately told the Federal Reserve that the agency’s funding requirement for the coming quarter was “$0.”
Vought then took to X to congratulate himself for depriving the agency of funds.
“Pursuant to the Consumer Financial Protection Act, I have notified the Federal Reserve that CFPB will not be taking its next draw of unappropriated funding because it is not ‘reasonably necessary’ to carry out its duties,” he wrote. “The Bureau's current balance of $711.6 billion is in fact excessive in the current fiscal environment. This spigot, long contributing to CFPB's unaccountability, is now being turned off.”
Note that $711,586,678.00 is not “$711.6 billion.” Vought eventually edited the post, but, as Georgetown Law Professor Adam Levitin notes, the director’s snap decision to defund the agency looks illegal on its face. Under the Administrative Procedures Act, government actions that are arbitrary and capricious violate the law. Vought’s decision to zero out the budget after being in office less than 24 hours can hardly be described as “reasoned” and will certainly be challenged under the APA, as will his orders to stop work and “pause” all enforcement actions.
Effectively shutting the agency down also prompted the immediate resignation of the agency’s top staff.
“I do not believe it is appropriate, nor lawful, to stop all supervisory activities and examinations, and I cannot longer serve as the Supervision Director,” Lorelei Salas wrote in a memo reported by CNBC.
“I don’t believe in these conditions I can effectively serve in my role, which is protecting American consumers,” echoed Eric Halperin, CFPB’s enforcement director.
If you’ve got a problem, DOGE can make it worse
As with every other federal agency Musk and his underlings have colonized, the arrival of the DOGE bros at CFPB did not improve matters.
Last week, four young DOGE staffers — Gavin Kliger, Luke Farritor, Nikhil Rajpal and Jordan Wick — descended on CFPB. Kliger has posted racist and misogynistic content from figures like Nick Fuentes and Andrew Tate, and Farritor is a 23-year-old coding whiz induced to drop out of college by venture capitalist Peter Thiel for a paid fellowship that allows young men to spend a year together being told they are so brilliant that they have nothing to learn and the regular rules don’t apply to them.
Bloomberg’s Jason Leopold and Evan Weinberger report:
At first, they had what was described as read-only access to a limited array of documents, including the agency’s internal personnel files, procurement records and budgeting and financial data, according to an email shared among CFPB officials.
Then, late Friday night, the DOGE staffers were granted access to all the CFPB’s data systems, including sensitive bank examination and enforcement records, according to five people familiar with the matter and emails seen by Bloomberg News. The people asked not to be identified, citing concerns over potential retribution. By Sunday, the agency was a skeleton, with its funding limited and activities suspended.
These guys have access to information that would be very helpful to their boss’s business interests. And while the entire staff of CFPB is locked out of the building for a week, they’re currently poring over it “in a conference room in the basement with the windows blacked out,” according to David Dayen at The American Prospect.
None of this has inspired confidence in the people most immediately impacted by it: CFPB staffers.
Litigation
The National Treasury Employees Union (NTEU) filed two lawsuits against Vought in his official capacity. In one, they allege that shutting down a congressionally created agency violates the separation of powers and should be enjoined.
In the other, they seek an order blocking “ongoing disclosure of employees’ personal information to Elon Musk and the other members of the ‘Department of Government Efficiency.’” Under the Privacy Act, the government can’t disclose personal records and in fact has an obligation to disclose 30 days in advance “any new use or intended use of the information in the system” to allow for public comment. Obviously that hasn’t happened here.
And the employees’ concerns are far from academic. As many people have noted, Musk’s takeover of the federal government strongly resembles his takeover of Twitter in 2022. At his company, he gave sympathetic journalists like Bari Weis and Matt Taibbi access to internal communications and employee emails for “The Twitter Files,” a smear job that falsely claimed the site had censored conservatives at the behest of the Biden administration.
Using his giant megaphone, Musk blasted out lies about former Twitter employees, one of whom was forced to flee his home after Musk called him a pedophile. Civil servants are rightly terrified that, if they speak out, their confidential personnel files and work emails will be illegally disseminated, either by Musk on Twitter or via leaks to reporters as happened to Lisa Page and Peter Strzok in the first Trump administration.
The cases have been assigned to Judge Richard Leon, a cantankerous George W. Bush appointee with a skeptical view of executive authority, despite his strong conservative bona fides. As of this writing, no hearing has been scheduled, but there will clearly be many more lawsuits as Vought’s “pause” continues indefinitely.
And meanwhile, there’s no cop on the beat, as Fed Chair Jerome Powell confirmed yesterday in testimony before the Senate Banking Committee.
"If the CFPB is not there, examining these giant banks to make sure they are following laws on not deceiving consumers, who is doing that job?" Senator Warren queried.
"I can say no other federal regulator," Powell agreed.
That’s it for today
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Thanks for reading.
The new reign of bullies—Trump/Musk moves - through a willing, gloating Vought - to strip protections and punish that naughty gal, Liz Warren. How manly, me boyz!
Soon, permission to cull the herd.