Trump Administration Seeks to Dismantle CFPB Amid Legal Challenges

Work at the Consumer Financial Protection Bureau (CFPB) has come to a sudden halt under the Trump administration. In particular, as of February 14, 2025, press reports and court filings confirm that the CFPB’s Acting Director Russell Vought had instructed CFPB employees to cease all supervision, investigations, enforcement, rulemaking, and stakeholder activities. On the same day, staff were locked out of buildings, phones, and laptops. And court filings indicate that the Acting Director (who has also been confirmed as the Director of the Office of Management and Budget) is poised to delete entire CFPB databases, lay off as many as 95% of remaining employees, and return the agency’s funding to the Federal Reserve, although these efforts were temporarily blocked on Friday evening in District Court.¹

These recent developments have occurred against a backdrop of broad statements from the executive branch regarding the significant restructuring of the federal bureaucracy and specific statements from Elon Musk and some members of Congress that the CFPB should be eliminated entirely.

What does this mean for the CFPB?

Although the Trump administration clearly intends to significantly curtail the agency’s operations, if not shutter it altogether, Congress created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As a result, the agency cannot be legally eliminated through a unilateral executive act.

In fact, that very issue — how much the Trump administration and Acting Director Vought may lawfully do without congressional approval — is the central issue in a pending lawsuit brought by the National Treasury Employees Union (NTEU), which represents federal employees across a range of agencies, including the CFPB. On February 14, 2025, the judge issued a temporary restraining order forbidding the Trump administration from: (1) deleting or destroying any CFPB data; (2) terminating any CFPB employees (except for cause) or issuing any reduction in force; and (3) taking any actions to reduce or relinquish the CFPB’s reserve funding. The court will hold a hearing on these issues and NTEU’s motion for a preliminary injunction on March 3, 2025.²

Although the outcome of the litigation is uncertain, there is little question that the administration will take advantage of whatever runway the courts make available. In that way, this seems very different from the approach of the first Trump administration. Back in 2017, the CFPB’s Acting Director, Mick Mulvaney, also placed rulemaking and new enforcement actions at the CFPB on pause and requested a $0 funding draw from the Federal Reserve. However, when Mulvaney was eventually replaced by Senate-confirmed Director Kathy Kraninger, she took a more nuanced approach. This time, the president has nominated former Federal Deposit Insurance Corporation board member Jonathan McKernan as the Director. Although, McKernan has yet to make public comments on the future of the CFPB, it is likely that the administration will continue the wind-down of the agency.

What does this portend for financial service providers?

The cessation of all CFPB rulemaking — including those proposed but not yet approved — will affect all providers of consumer financial services. This pauses, for example, the proposed interpretive rule on electric funds transfers using digital assets (which would have interpreted the scope of the Electronic Fund Transfer Act to cover certain transactions involving digital assets) and the proposed “data broker” rule (which would have interpreted the Fair Credit Reporting Act to impose limitations and obligations on a broader range of entities that collect or share consumer data).

The cessation of supervisory and enforcement activity at the CFPB will also have an immediate impact on depository and nondepository institutions that have been subject to the CFPB’s ongoing supervision and inquiries. In the immediate term, it will likely create some uncertainty for supervised institutions when considering the resources allocated to preparing for examinations and responding to examination inquiries and findings, but also assessing how to properly address issues or practices that were under review.

In the meantime, all applicable federal consumer protection laws remain on the books. So, even if the CFPB’s investigative, supervisory, and enforcement activities are curtailed, other federal financial regulatory agencies like the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Federal Reserve still have their own authority in this space, as does the Federal Trade Commission. In addition, a host of state attorneys general, particularly in “blue” states, are poised to step in if they perceive a void. And, of course, private litigation and community group activism is likely to increase in the absence of CFPB enforcement activity.

Finally, financial institutions should pay attention to the likelihood that — at the very least — the CFPB and other federal agencies will receive direction from the White House to reverse, roll back, or modify various regulations and policies. We at Arnold & Porter will be vigilantly monitoring these and other developments, and will keep you informed.

In the meantime, if you have questions or other thoughts, please reach out to any of us in the Financial Services group, or those on our Executive Orders Task Force who are evaluating the impact of all of the new administrations and their impact on our clients.

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For additional insights on the impact of the new administration, Arnold & Porter’s Financial Services group invites you to join us in New York on March 5, 2025 for a discussion of the key legislative, regulatory, transactional, and enforcement trends shaping the banking industry in 2025. We will cap off the event with a reception. Please register here.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.