CFPB firing line: DOJ moves to axe half the bureau's staff

Bloomberg News

• Key insight: The agency's enforcement and supervision units would face the heaviest hits, with staffing plummeting by 80%.
• Supporting data: CFPB officials alleged that a new reduction in force, or RIF, is a financial necessity after Congress slashed the bureau's budget in half.
• Forward look: Critics view the latest "revised" RIF plan as a tactical maneuver to bypass current court injunctions. 

The Consumer Financial Protection Bureau has asked an appeals court to allow acting CFPB Director Russell Vought to immediately fire more than half of the agency's staff.

On Tuesday, the Department of Justice filed a motion with the U.S. Court of Appeals for the District of Columbia Circuit seeking to modify a stay that has kept the CFPB from firing employees. Vought is asserting the executive branch's right to reorganize the agency at will by adopting a "revised" reduction in force, or RIF, that the government claims is a fundamentally different plan than the one in its legal battle with the bureau's union, and that a previous RIF is now moot. 

By asking the D.C. Circuit to send the case back to the lower district court, the government is trying to hold off the current appeal and prevent the appellate court from issuing a definitive, precedent-setting ruling that could permanently limit Vought's authority. The government contends that the current preliminary injunction that put a halt to all firings should no longer apply.

Under the new RIF, the CFPB would fire roughly 620 employees and retain just 556, a 53% drop from current staffing levels. When Trump took office a year ago, the bureau had 1,723 employees. 

Notably, the CFPB's enforcement and supervision units would bear the brunt of firings if a court approves the RIF. Enforcement faces an 80% cut in employees to just 50 attorneys and staff, from 254 a year earlier, according to the filings. Supervision staff would be cut to 77 employees, from 523 a year ago. Last April, Vought rescinded the bureau's supervisory and enforcement priorities and stated that the agency would instead cede those areas to state regulators. 

The CFPB has been litigating the case since last February when the National Treasury Employees Union sued Vought, alleging he was dismantling an agency created by Congress. During oral arguments in February, several judges suggested that if the CFPB presented a credible RIF, and planned to continue running the agency to fulfill its legal duties, then the case could be remanded back to the district court, and an injunction could be modified to allow a scaled-back round of firings.

Consumer advocates that sued Vought are expected to counter that cuts to the bureau's research, monitoring and regulations division will make it impossible for them to get reports that they claim they need from the CFPB. Research would retain 125 people, down from 228 a year ago. 

At the same time it is unclear whether the revised RIF will convince the judges given that the CFPB lost significant credibility with the district court.  

The DOJ presented the case as one in which President Trump is being harmed because the court is not allowing him to enact his agenda. 

"CFPB should be permitted to implement its new, superseding RIF plan, which is designed to carry out the President's policy goal of shrinking the federal bureaucracy while still carrying out the bureau's statutory obligations," said Brett A. Shumate, a DOJ assistant attorney general. "A modification of the stay would alleviate ongoing harm to the Executive Branch's prerogative to right-size agency operations in line with an important presidential policy." 

The DOJ gave three reasons why a RIF should be allowed. First, the new RIF replaces the old RIF. Second, Shumate claims the CFPB cannot sustain the current level of spending indefinitely because Congress slashed its budget in half last year, cutting the statutory cap on funding from the Federal Reserve. 

The bureau "expects that some RIF will be necessary by the fourth quarter of calendar year 2026 to remain within the statutory appropriation," he wrote.  

Finally, Shumate cited a Supreme Court decision last year in Trump v. CASA, Inc., which found that federal courts cannot issue nationwide injunctions against government policies. 

"The RIF plan CFPB has now announced reflects a significant downsizing of the Bureau from its operation under the prior Administration — one that CFPB has determined nonetheless allows the CFPB to continue meeting its statutory obligations," he wrote.

Geof Gradler, a former lobbyist and congressional aide who was hired nine months ago to be the CFPB's deputy director, explained the RIF in a memo included in the DOJ's filing, with detailed cuts to each division. The DOJ said the revised RIF "satisfies the original stay order's requirement of a particularized assessment." The Gradler memo explains how the number of staff to be retained in each division fulfills the bureau's legally required functions. He determined how supervision and enforcement should be significantly reduced.

Judges seem inclined to allow CFPB RIFs — if there's a plan

Experts said that judges reviewing ongoing litigation between the Consumer Financial Protection Bureau and its employee union seem inclined to allow reductions in force to proceed if the CFPB presented a credible plan for running the agency.

Under the proposed RIF, the Office of Civil Rights would retain two employees, compared with 12 a year ago. The Office of Fair Lending and Equal Opportunity would keep four employees, down from 15, while the Office of Minority, Women and Inclusion would have two, down from 12 a year ago.  

Jeff Sovern, the Michael Millemann Professor of Consumer Protection Law at the University of Maryland's Francis King Carey School of Law, called the change a bad idea. 

"At a time when consumer complaints to the CFPB are soaring, cutting back on the number of folks making sure consumer financial companies are complying with the law is a truly terrible idea," Sovern said.

The memo states that supervision will be cut dramatically. In 2024, the CFPB conducted a total of 107 exams: 46 at banks and 61 at nonbanks. By comparison, in 2026, the CFPB plans to conduct 64 exams: 42 at banks, and 22 at nonbanks. 

Interestingly, Vought has repeatedly issued RIF notices around holidays, several CFPB employees said, noting that he sent out a previous RIF exactly a year ago. The DOJ, representing Vought, asked the court to issue a limited, 45-day remand to the district court to reconsider the new RIF.

For more than a year, Vought has refused to compromise on cutting the CFPB's staff, and has said publicly that he plans to shutter the agency. The union alleged last year that he had hatched a plan to fire 90% of the CFPB's employees to bring the agency down to just 200 people. 

In the meantime, the CFPB has been litigating with its union for more than a year and paying many of its roughly 1,200 employees not to work. It finally put forth a plan that could easily have been implemented a year ago, without wasting judicial resources, lawyers said. 

The agency has been in the crosshairs of the Trump administration largely because it was created by Sen. Elizabeth Warren, D-Mass. For more than a decade, financial institutions have complained to Republican lawmakers about the CFPB, its enforcement actions, stiff penalties and allegations of regulatory overreach. 

Last year, President Trump told reporters in the Oval Office that his goal is to dismantle the CFPB, claiming it "was set up to destroy people."