On Friday, a pivotal decision by the U.S. Court of Appeals for the District of Columbia Circuit marked a significant win for the Trump administration, effectively enabling the dismantlement of the Consumer Financial Protection Bureau (CFPB). The court vacated a preliminary injunction that had been preventing this action, signaling a major shift in the oversight of financial institutions.
The contention began on February 1, with President Trump dismissing CFPB Director Rohit Chopra, an appointee of President Biden. Acting Director Russell Vought was swift in directing the staff to cease operations and to shut down the agency's headquarters. This abrupt move incited a lawsuit from the National Treasury Employees Union, which represents the bulk of CFPB employees, among other plaintiffs.
U.S. District Judge Amy Berman Jackson initially put a halt to the Trump administration's plans, citing concerns over the sudden closure of the agency. However, administration lawyers contended that the injunction was an undue interference with the president's executive privilege to streamline federal agencies in line with policy objectives.
Established under the 2010 Dodd-Frank Act, the CFPB's unique position allows it to be funded by the Federal Reserve and to operate with minimal congressional oversight since its budget does not require legislative approval. Critics have long argued that this autonomy renders the CFPB "untouchable."
The Bureau's practices have been under scrutiny, particularly following a 2015 report by Investor’s Business Daily highlighting the diversion of millions in settlement payments from lending discrimination victims to groups affiliated with the Democratic Party. Moreover, the CFPB's Civil Penalty Fund has faced criticism, being labeled as a "shakedown" tool against financial institutions.
These concerns were reiterated by the Fifth Circuit in October 2022, emphasizing the CFPB's independence from Congress and, consequently, its lack of accountability to lawmakers and the public.
This recent court ruling is part of a series of legal triumphs for the Trump administration. Earlier in the week, a federal judge upheld Alabama's law restricting diversity, equity, and inclusion (DEI) programs in educational institutions. U.S. District Judge David Proctor ruled against a preliminary injunction sought by University of Alabama faculty and students, allowing the law to stand, which prohibits DEI programs that propagate "divisive concepts."
The court's decision on Friday underscores the Trump administration's ongoing commitment to restructure federal agencies and regulatory frameworks, echoing promises to tighten control over entities that have been claimed to operate without proper oversight.
