CFPB cuts can resume, divided appeals court rules

By Katelyn Polantz, CNN

(CNN) — A divided federal appeals court is allowing President Donald Trump to downsize the Consumer Financial Protection Bureau at this time, siding with the administration on its plans to reshape government agencies and its employees.

Groups that represent CFPB employees or use the agency to protect consumers from predatory banking sued months ago, after Trump replaced the agency’s director shortly after he took office and the administration paused the CFPB’s efforts. The administration then canceled the agency’s lease for its headquarters building, and terminated or planned to cut more than 80% of the agency’s workforce.

A trial level judge in Washington, Amy Berman Jackson, quickly stepped in to block the near-shuttering of the agency. But on Friday, the DC Circuit decided employees of the agency would need to challenge their loss of employment in other venues outside of the federal court district court first.

The appeals court, however, reiterated that some functions of the CFPB, like responding to consumer complaints, can’t be shut down. But the ruling Friday took at face value the Trump administration’s argument it hasn’t decided to shut down the CFPB in full, and cited the lack of existence of a memo specifying that the CFPB would be closed.

“We agree with the government that there was no reviewable decision to shut down the CFPB,” Judge Greg Katsas wrote in the opinion. Katsas and Judge Neomi Rao, who were both appointed to the bench in Trump’s first presidential term, split from Judge Nina Pillard, an Obama appointee, in making the decision.

Pillard disagreed with her colleagues on the bench over lessening the role of the courts in the case.

“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,” she wrote.

Established after the 2008 financial crisis, the CFPB has long been a target of conservatives wanting to undermine financial regulations championed by Democrats in Congress.

More appeals are possible, as are additional legal decisions on the law governing the CFPB.

“It will be cold comfort to Plaintiffs if they ultimately succeed on the merits in their challenge to the CFPB’s shutdown only to discover that Defendants have put the agency in a hole from which it can never fully recover,” Pillard also wrote in her dissent. “That would be the effect of the agency’s decisions to fire all or virtually all employees who once worked at the agency, terminate every contract that supported their work, purge all the data they amassed, and ghost all the experts and organizations with whom they had built up beneficial working relationships.”

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