No, The CFPB’s Not Dead. It’s Not Even Close to Dead.

A lot of coverage of the Trump-Musk takeover of the CFPB has been treated the matter as if the Trump-Musk blitz has destroyed the agency. It hasn’t. Not even close. The CFPB has been stood down for now, but it is fundamentally intact. It hasn't been "deleted."  

 

It is possible for a smart, determined, and patient administration to seriously unwind large parts of the regulatory state while playing be constitutional rules.  DOGE, however, lacks the knowledge, personnel, and time to actually accomplish this. You need a lot of lawyers who know how agencies work—both in terms of substantive law and in terms of federal government employment law. They don’t have that. All they have is a handful of under-25-year old engineers and a few non-specialist attorneys. These folks don’t know how to actually dismantle government agencies. That’s why DOGE has adopted the shock-and-awe approach to government that makes lots of headlines and can foul things up for a while and generally make life unpleasant, but it isn’t actually capable of making any lasting structural changes DOGE cannot kill off the CFPB. That’s because the CFPB requires two things to be effective:  its legal authorities and its personnel. Trump and Musk have not dismantled either.  

Let’s review:  

 

(1) The CFPB’s Legal Authorities Remain Unaffected. The Trump-Musk takeover has not affected the CFPB’s legal authorities one iota. The Consumer Financial Protection Act and the enumerated consumer laws (TILA, EFTA, FDCPA, FCRA, ECOA, etc.) can only be repealed or amended by act of Congress, and Trump-Musk doesn’t have the votes to change those laws. Likewise, all of the regulations that are promulgated under those statutes remain unaffected. To change them would require going through normal Administrative Procedures Act notice-and-comment rulemaking. That’s slow and subject to judicial challenge. Indeed, to even so much as change an effective date for a pending regulation that is not yet in effect, the Trump-Musk CFPB would have to still go through publication in the Federal Register, which is hard to do when you don’t have the relevant employees working. There are various policy statements and circulars and examination manuals and other sort of non-binding things like that the Trump-Musk can repeal or amend fairly easily without APA notice-and-comment, but again it still requires having the relevant employees actually working.

 

Simply put, no matter how hard the Trump-Musk administration tries, it does not have the ability to unwind most of the CFPB’s legal authorities. Those authorities will ride through the administration intact and will be able to spring back into action on the first day of the next administration.  

 

(2) The CFPB’s Personnel Are Still in Place. The CFPB’s has a highly skilled civil service workforce. It is all still in place. As far as I know, no CFPB employees have been fired to date.  Some job offers were rescinded and new hires in their probationary periods remain vulnerable to dismissal.  The political appointees have resigned, but they were always a very, very small percentage of agency staff, and it was expected that they would depart with a change of administration.  The Bureau’s other employees have been told not to undertake any work or come into the office, but they are still employed and getting paid. They have not even been placed (formally) on administrative leave. (That’s probably because the Trump-Musk team learned belatedly that they can only place federal employees on administrative leave for a total of 10 days. Whether the current situation is constructively administrative leave, such that 11 days of it would violate the law is likely to become the subject of litigation.) Critically, the “fork in the road” resignation offer that was made to federal employees underscores the inability of the Trump-Musk administration to engage in wholesale firings without cause: you don’t make a severance offer when you can simply can the employee at no cost.  

 

Now I do not envy CFPB employees in the current situation: yes, they are being paid and getting their benefits, but there’s a huge amount of uncertainty hanging over their heads, and these are folks who often took pay cuts to go work for the federal government because they believe in the work—they want to serve their country and do their jobs and are instead being told they have to stand down. And that’s exactly the situation DOGE wants to create—make it unpleasant to work for the federal government. But the irony is that by sticking all of them in this boat simultaneously the Trump-Musk administration has virtually guaranteed that most will not resign because the private employment market is going to be flooded; there aren’t a lot of great alternatives available. How many law firms are likely to be stocking up on consumer finance attorneys right now? So yes, there will be some attrition of personnel over the next four years, but I’d predict that the workforce that is still around come the next administration will be energized in a way that we haven’t seen since the CFPB’s first days. In other words, we might have four years without much (or any) enforcement or rulemaking activity, but hang on to your hat when the wheel turns. 

 

My prediction is that when it becomes clear that the voluntary resignation offer doesn’t get much take-up that the DOGE folks then try mass layoffs, but they’re going to be on shaky legal grounds for what is called a "Reduction in Force" (basically they will have to claim that there is a "lack of work" and they will also have to go through a laborious process for each affected employee), and they also know that they don’t have the gas for a long fight. They need to be able to declare victory fast or they’re going to get mired down and will lose focus.

 

The DOGE approach is basically Blitzkrieg:  roll in with an armored tip of tweets (the equivalent of a Stuka dive siren) and blustery demands for “source code” and the like and tell civil servants to go home or resign by artificial deadlines. It doesn’t matter whether any of this is actually legal. Instead, the point is to create “shock and awe” and hope that a demoralized American civil service will collapse like the demoralized French Third Republic in 1940. The Blitzkrieg strategy requires the defender to believe that defeat is inevitable. But it’s not. There’s actually a straightforward strategy to defeat a blitzkrieg assault that works very well. It’s about doing what you can to blunt the attack while being patient and waiting for the blitzkrieg attackers to run out of fuel and methamphetamines. That was what happened in the 1918 Kaiserschlacht. It’s what would have happened in France in 1940 if the French had been willing to keep fighting. It’s what happened on the Eastern Front in 1941-42. And it’s what happened in 1944 at the Battle of the Bulge. (Yes, I like to read history in my spare time...)

 

And that suggests a strategy for responding to DOGE: slow ‘em down with litigation and wait ‘em out. Force DOGE to dismantle the CFPB the proper way, bit by bit through legal processes, rather than through shock-and-awe shortcuts. DOGE knows it lacks the capacity to dismantle the agency the proper way, so they’ll eventually just give up. (One can see this point as akin to the argument made by Ezra Klein here.) This sort of strategy takes seeing the big picture, however. If the response is dictated by the hourly news cycle, DOGE Blitzkrieg can work. But if one steps back and sees the larger move, then it becomes clear that DOGE is a lot of sizzle, but not much steak.

 

We’re already seeing the first salvos of a litigation response. The National Treasury Employees’ Union filed a suit seeking to stop Vought’s CFPB take-over, but NTE's complaint is weak and reads like a rushed filing: NTEU relies entirely on a vague separation of powers argument and is likely to lose, regardless of the judge. But that does not mean that a litigation approach is generally pointless. It just means that it needs to be done better. In particular, there are a bunch of statutory arguments that can be made, especially if one recognizes that the strategy is not an outright win, but delay and forcing DOGE to actually do the hard work that it isn’t prepared or capable of doing. I suspect that the NTEU suit is not the last bit of litigation we’ll see regarding the CFPB.

 

I don't want to sugarcoat things: in virtually any scenario, we will see scant CFPB enforcement, supervision, and regulation, if any over the next four years. But until and unless Trump-Musk change the CFPB's legal authorities and dismiss its personnel, it will be a hiatus, nothing more, and there will be a CFPB capable of rebooting in the next administration.

Comments

[Joan Carr]

thanx for the info and the sanity!

[Barbara Deneris]

The first sentence needs to be reworded. Also, there is a typo in the second paragraph. It reads “… while playing be constitutional rules.” It should read: “by constitutional rules.”

[Barbara Deneris]

Thanks for posting this information. The American people need CFPB and we are rooting for you.

Best of luck!