After the election, we wrote in this blog, half-tongue-in-cheek, that Elon Musk might do what Justice Thomas would not—terminate the Consumer Financial Protection Bureau. We could not have guessed any better or predicted the speed with which the dismantling would occur.
For a couple weeks after the inauguration, the administration held its powder dry vis-à-vis the CFPB. That all changed on February 1, when Director Rohit Chopra was fired. At first the new Treasury Secretary, Scott Bessent, was tapped to temporarily oversee the Bureau. A few days later, Budget Director Russell Vought got the nod. And then, over the weekend, the White House nominated Jonathan McKernan to be the director.
When new leaders step in, they can change course abruptly. That’s exactly what happened here. All pending actions, including rulemaking and enforcement, are on hold, at a bare minimum.
Elon Musk’s DOGE team moved in and are attempting to access consumer data, much of it confidential. The CFPB has a lot of it. The fact that Musk’s X is launching a new payment platform that would be regulated by the CFPB later this year is, I’m sure, a mere coincidence. Meanwhile, they’re also slashing staff much like in other departments. Last week nearly ten percent of the CFPB’s employees, including probationary ones, were let go.
DOGE, through Vought, is also trying to refuse the CFPB’s funding from the Federal Reserve, which is a call back to previous blogs and Justice Thomas’ opinion referenced above. The CFPB gets its funding from the Federal Reserve, not as an annual appropriation by Congress, but the Supreme Court found the structure to be constitutional.
At least two federal lawsuits—one in D.C. and the other in Baltimore—are trying to slow down the wrecking ball. In one, the government agreed to withhold returning the funds to the Federal Reserve until early March, after another hearing. In the other, the court ordered the CFPB to refrain from terminating any employee except for employment-related cause.
The underlying question here is whether the President has the authority to dismantle and essentially defund an entity that was mandated by Congress, as part of Dodd-Frank after the Great Recession. As we’ve written before, many consider the CFPB as a good idea that went too far. Jamie Dimon of Chase Bank chimed in on that this week as well, using a vulgar reference to describe the departing Director Chopra and noting that many of the Bureau’s functions duplicate those of other agencies. Musk has not minced words, recently tweeting “CFPB RIP.”
Stay tuned for more volatility, as this is certainly going to continue. Meanwhile, if you have any questions about state or federal regulations or compliance, contact the attorneys at Dalton & Tomich today.
