Trump administration's attempt to dismantle CFPB faces legal hurdles

The Consumer Financial Protection Bureau, established in 2010 to oversee financial institutions and protect consumers, is at the center of a legal battle following the Trump administration's efforts to effectively shut down the agency. On 7 February 2025, Acting Director Russell T. Vought ordered the cessation of all CFPB operations, instructing the agency's 1,700 employees to "stand down from performing any work task," as reported by the New York Times. This move aligns with the administration's broader agenda to reduce federal oversight, with Elon Musk, head of DOGE, publicly supporting the agency's closure.​

The abrupt shutdown has faced significant opposition. The National Treasury Employees Union filed a lawsuit, arguing that only Congress has the authority to dissolve CFPB, highlighting a potential violation of the separation of powers. In response, US District Judge Amy Berman Jackson issued a temporary restraining order on 14 February 2025, halting mass layoffs and mandating the continuation of essential functions, including addressing a backlog of over 16,000 consumer complaints, some involving imminent foreclosures. Judge Jackson criticized the administration's approach as "shoot first and ask questions later," underscoring the legal complexities of unilaterally dismantling a congressionally mandated agency.​

Despite these legal interventions, the administration persists in its efforts. Recent court testimonies revealed ongoing plans to eliminate CFPB, with officials acknowledging continued discussions about staff reductions. This has led to a fragmented operational state, where certain critical functions are temporarily restored under court order, while the agency's future remains uncertain. The situation has prompted concerns among consumer advocates and financial industry stakeholders about the potential impact on consumer protections and market stability.​

The outcome of this legal struggle will have profound implications for the balance of power between the executive branch and congressionally established independent agencies, as well as for the future of consumer financial protections in the United States.​