Federal judge orders top CFPB official to testify on agency dismantling

WASHINGTON (CN) — The federal government must provide witness testimony to explain what actions it has taken against the Consumer Financial Protection Bureau, a federal judge ruled on Monday.

U.S. District Judge Amy Berman Jackson scheduled the evidentiary hearing for March 10 after receiving little clarity from the Justice Department and CFPB Chief Operating Officer Adam Martinez on whether legally mandated services were still being provided.

The Barack Obama appointee said she received several declarations from employees, as recent as Sunday night, indicating that services meant to protect the elderly and veterans from financial scams and to assist those affected by natural disasters were affected by acting Director Russell Vought’s broad stop-work order.

“South Carolina is burning as we speak, and it begets a policy of this administration to get aid and mortgage forbearance to victims of natural disasters as soon as possible,” Jackson said, pointing to the approximately 175 wildfires burning throughout North Carolina, South Carolina and Georgia.

Vought, head of the White House’s Office of Management and Budget, told employees in a Feb. 8 email that he was halting nearly all the agency’s activities to bring the consumer protection bureau in line “with the president’s policies.”

He also ordered its headquarters closed on Feb. 10, which remains in place.

Martinez asserted in a declaration earlier on Sunday that key services like the Office of Consumer Response, a hotline for consumers to file complaints, were still functional despite Vought’s shutdown order.

Jackson found the seemingly contradictory statements from either party problematic and a hurdle for her to effectively rule on the union’s request for a preliminary injunction.

“We can’t have edicts issued with people’s fingers crossed behind their backs,” Jackson said Monday.

She ordered Martinez and certain employees to provide testimony at the evidentiary hearing as to whether the agency’s consumer complaint response team, student loan ombudsman’s office, and natural disaster response unit are still operating.

Further, a consent agreement between the union and the government preventing the consumer protection bureau from laying off employees en masse and destroying the agency’s data would remain in place until she ultimately issues a preliminary injunction.

The National Treasury Employees Union sued the Trump administration on Feb. 9 after reports that nongovernmental agents of the so-called Department of Government Efficiency sought access to sensitive information and aimed to dismantle the agency as the U.S. Agency for International Development was.

In a Feb. 13 amended complaint, they warned that Vought ultimately planned to fire up to 95% of the consumer protection bureau’s staff.

Justice Department attorney Liam Holland argued Monday that Vought’s stop-work order was a normal part of a presidential transition to bring agencies in line with a new administration’s policy goals. Further, any order from Jackson would put the agency in a court-managed receivership, an overstep of her authority.

Jackson did not find either argument convincing, noting that any injunction she would issue against the government would merely order it to continue providing services Congress mandated in the Dodd-Frank Act.

“Is implementing federal consumer financial laws for the purpose of ensuring that consumers are protected from unfair, deceptive, or abusive acts or practices inconsistent with the policy positions of this administration?” Jackson asked.

Holland responded that he did not know, causing a wave of laughter in the packed courtroom.

Deepak Gupta of Gupta Wessler represented the union and argued that Vought was circumventing employment protections for federal employees by terminating staff en masse rather than terminating them for valid performance concerns.

He noted that the unions were operating in uncharted waters, with little case law detailing how a federal judge could prevent the president from taking broad action against executive agencies, but pointed to a parallel lawsuit regarding paused USAID funding.

Gupta also said that Vought and the Trump administration have discussed turning the consumer protection bureau into a five-man team under the Treasury Department — a way to maintain the congressionally approved agency while still gutting it.

Jackson seemed skeptical considering the unprecedented circumstances in the case but indicated concern regarding the apparent gutting of the consumer protection agency.

“You can’t disable and dismantle an agency in such a short period that it’s not there to implement the mandatory requirements,” Jackson said. “You can’t blow it up, but why should you be able to starve it to death?”

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