This Is What Open Class War Looks Like: Tracking the Latest at the CFPB

The vast majority of employees at the Consumer Financial Protection Bureau (CFPB)—an estimated 1,400 to 1,500 people out of 1,700—have received layoff notices, according to a lawsuit filed in court yesterday by the National Treasury Employees Union (NTEU).

A hearing was held on April 18 by Judge Amy Berman Jackson. Judge Jackson issued an order suspending the administration’s action for now. As the Associated Press reports, however, “The decision leaves in limbo a bureau created after the Great Recession to safeguard against fraud, abuse and deceptive practices.”

Understanding the Stakes

It is easy to get lost in all of the political and legal maneuvering, but the stakes are high. The CFPB, it’s important to recall, was formed in response to the Great Recession that led to the 2008 financial crisis.

To be clear, during the Great Recession, Democrats had majorities in both houses of Congress and Barack Obama was president, yet the policy response was dismal—the banks won, while the people lost. Specifically, only one banker went to jail; banks big and small were bailed out; homeowners were not; and millions, especially in communities of color, lost their homes and trillions in wealth. A lot about contemporary US politics can be traced back to this one big policy failure.

In short, working people lost and the powers-that-be won during the Great Recession. Still, one small silver lining emerging from this mess was the creation of the CFPB. That small silver lining victory is now itself at risk.

Why does the CFPB matter? NPQ covered this question in detail in February. To reiterate: one simple answer is the nearly $20 billion in settlements negotiated by the agency on behalf of consumers.

But perhaps an even clearer answer is provided in a memo issued by Mark Paoletta, the agency’s chief legal officer. As reported by The New York Times, in his memo distributed on April 16, Paoletta helpfully indicated a number of the agency’s most important functions by listing the areas that the agency “will deprioritize” in its consumer fraud enforcement work, going forward:

• Loans or other initiatives for “justice involved” individuals (criminals).
• Medical debt.
• Peer-to-peer platforms and lending.
• Student loans.
• Remittances.
• Consumer data.
• Digital payments.

In short, if you are defrauded by a hospital collection agency or a student loan servicer or an online biller, don’t expect help in President Donald Trump’s Washington—at least if adminsitration officials have their way.

What’s Next

The CFPB layoff notices mark the latest in a series of legal and political moves and countermoves. As NPQ has previously covered, Judge Amy Berman Jackson of the US District Court in Washington, DC, issued a ruling stopping mass firings in February, and later issued a preliminary injunction in a 112-page opinion in March. This later ruling, however, was scaled back by a 3-person appeals court on April 11, which has scheduled further hearings for May 18.

Needless to say, the Trump administration did not wait until May 18. The appeals court ruling in early April included language that terminations were allowed if “an individualized assessment” determined that continued employment was “unnecessary” to carry out the agency’s statutory duties. Paoletta’s memo presumably meant to declare as many functions as “unnecessary” as possible to justify the layoffs, which occurred the following day. Of course, this is well before any job-by-job individualized assessments would be humanly possible.

The NTEU, which represents employees in 37 federal agencies and offices, notes in its lawsuit that CFPB workers have “been told that entire offices, including statutorily mandated ones, have or soon will be either eliminated or reduced to a single person. And all affected employees will be entirely cut off from computer access—a functional work stoppage—at 6:00 pm tomorrow, April 18.”

In a statement, the NTEU noted that the Trump administration’s mass layoff action is “not just an attack on the hardworking professionals who serve as our financial advocates, it is an assault on the financial prosperity of the American people. Gutting this agency will leave Americans in nearly $20 trillion in consumer debt. Make no mistake, the impacts of having less supervision of financial institutions will signal economic insecurity for many across this nation—and that’s exactly what this administration wants.”

At least at this first stage, Judge Jackson has refused to allow the mass firings to stand.

Still, there is a longer-term struggle here. And thinking through alternative strategies to defend consumer rights is important. As Peter Sabonis wrote in NPQ in January, if the federal government won’t protect consumers, maybe states could join together to do so through a multi-state agency established by an interstate compact. Sabonis added: “It’s hard to imagine how the National Guard could mobilize against a compact-created Consumer Financial Protection Bureau that protected participating households from predatory lending, usury fees, and the ravages of speculative capitalism.”