A 2-1 ruling by the U.S. Court of Appeals for the District of Columbia Circuit on August 15, vacated a lower court’s injunction, allowing the Trump administration to move forward with plans to lay off a significant portion of the Consumer Financial Protection Bureau’s (CFPB) approximately 1,700 employees.
The decision, part of an ongoing legal battle, permits reductions in force while litigation continues, with implications for the agency’s regulatory oversight of banks, fintechs, and other financial entities.
Court’s Majority and Dissenting Opinions
Judge Gregory Katsas, joined by Judge Neomi Rao, both Trump appointees, wrote the majority opinion, stating, “The district court lacked jurisdiction to consider the claims predicated on loss of employment,” which must be addressed through the Civil Service Reform Act’s specialized review process.
Katsas further noted that additional claims under the Administrative Procedure Act (APA) failed to target a final agency action, and plaintiffs did not raise sufficient constitutional questions to warrant judicial review.
The ruling lifts a preliminary injunction issued by U.S. District Judge Amy Berman Jackson in March, which had paused the layoffs to prevent the agency’s potential dismantling before the case’s merits could be fully adjudicated.
Judge Cornelia T.L. Pillard, an Obama appointee, dissented, arguing that the injunction was necessary to maintain the CFPB’s operations while evaluating the legality of the administration’s actions.
“The notion that courts are powerless to prevent the President from abolishing the agencies of the federal government that he was elected to lead cannot be reconciled with either the constitutional separation of powers or our nation’s commitment to a government of laws,” Pillard wrote.
She emphasized that the lower court’s order preserved the agency’s ability to fulfill its statutory duties under the 2010 Dodd-Frank Act.
Legal Battle and Allegations
The National Treasury Employees Union (NTEU), representing most CFPB employees, alongside co-plaintiffs including the NAACP, filed the lawsuit in February, alleging that the administration’s actions, led by Acting CFPB Director Russell Vought, violated constitutional separation of powers and the APA by attempting to unilaterally dismantle a congressionally established agency.
The plaintiffs pointed to actions starting in February, including a stop-work order, contract cancellations, and data purges, as evidence of an intent to shutter the CFPB.
The administration countered that the layoffs align with executive priorities to streamline the agency and denied any final agency action subject to APA review, asserting compliance with Dodd-Frank mandates.
Context and Next Steps
The appeals court’s mandate is delayed for seven days, allowing the NTEU to petition for a rehearing by the panel or en banc, during which the injunction remains in effect. An appeal to the full D.C. Circuit or the U.S. Supreme Court is also possible, following the Supreme Court’s July 8 decision lifting protections for workers at other federal agencies.
The CFPB, created post-2008 financial crisis to protect consumers from financial fraud and deceptive practices, has faced significant changes, including a 50% budget cut via the July 2025 GOP tax and spending law and a shift in focus toward issues like mortgage fraud, with reduced emphasis on medical debt and digital payments, per internal memos.
Neither the CFPB nor the plaintiffs’ counsel immediately responded to requests for comment.
