D.C. Circuit Partially Stays Preliminary Injunction in NTEU v. Vought: Could the Acting Leadership Have Enough Flexibility to “Delete” the CFPB?
The last couple weeks in the life of the CFPB have been a rollercoaster. On March 28, 2025, the D.C. District Court issued a preliminary injunction in the NTEU et al. v. Vought lawsuit, in which the plaintiffs sued to stop the current CFPB leadership from “deleting” the agency (which I wrote about here). The preliminary injunction tied the hands of the current acting leadership of the CFPB and forced it to rehire previously terminated employees. The CFPB appealed to the D.C. Circuit, filing an emergency motion for an administrative stay and a stay pending appeal of the preliminary injunction. On Friday, April 11, 2025, the D.C. Circuit Court of Appeals granted the CFPB’s motion for a stay, but only in part, leaving certain protections in place that would prevent the wholesale “deletion” of the CFPB. In addition, Senator Tim Scott, Chairman of the Senate Banking Committee, reportedly stated that a full Senate vote on the nomination of Jonathan McKernan to be CFPB Director (which I wrote about here) is “imminent,” so the CFPB may soon have a permanent director. Below I briefly describe the D.C. Circuit’s order, the District Court’s opinion on the preliminary injunction, and potential impacts for the CFPB and the industry.
I. D.C. Circuit’s Stay of the Preliminary Injunction Pending Appeal
The D.C. Circuit’s order comes after it issued an administrative stay on April 3, 2025, which it issued pending the court’s consideration of the CFPB’s appeal of the preliminary injunction. The appellate court’s earlier administrative stay incorporated by reference the parties’ agreement during the District Court proceedings to essentially freeze the state of the CFPB. That agreement—later memorialized by the District Court in consent orders on February 14 and March 12—limited the ability of the acting leadership to delete data, terminate employees, issue a reduction in force (“RIF”) notice, transfer CFPB’s reserve funds, and terminate contracts. After hearing oral argument on April 9, 2025, regarding the CFPB’s emergency motion for a stay pending appeal, the D.C. Circuit issued an order granting, in part, the CFPB’s motion to stay the District Court’s preliminary injunction.
As a reminder, the District Court’s preliminary injunction (again, which I wrote about here) required the CFPB’s acting leadership, in part, to:
1. maintain and not delete, destroy, remove, or impair any data;
2. reinstate all probationary and term employees terminated between February 10, 2025 and the date of the order;
3. not terminate any CFPB employee, except for cause related to the individual employee’s performance or conduct, and not issue any reduction-in-force notice to any CFPB employee;
4. not enforce the February 10, 2025 stop-work order or require employees to take administrative leave;
5. ensure that employees can perform their statutorily mandated functions;
6. must ensure that in accordance with 12 U.S.C. § 5492(b)(3), the CFPB Office of Consumer Response continues to maintain a single, toll-free telephone number, a website, and a database for the centralized collection of consumer complaints;
7. rescind all notices of contract termination issued on or after February 11, 2025, and they may not reinitiate the wholesale cancellation of contracts; and
8. file a report with the District Court that it is in compliance with the court’s order.
The D.C. Circuit’s April 11th order stayed (or provided a further interpretation of) the following provisions of the District Court’s preliminary injunction:
Stayed #2 above, “insofar as it requires defendants to reinstate employees whom defendants have determined, after an individualized assessment, to be unnecessary to the performance of defendants’ statutory duties.”
Stayed #3 above, “insofar as it prohibits defendants from terminating or issuing a notice of reduction in force to employees whom defendants have determined, after a particularized assessment, to be unnecessary to the performance of defendants’ statutory duties.”
Stated regarding #4 above that “the court understands provision four (4) to allow work stoppages that defendants have determined, after a particularized assessment, would not interfere with the performance of defendants’ statutory duties. On that understanding, provision four (4) remains in effect.”
Stayed #8 above.
The D.C. Circuit set a schedule for the CFPB’s appeal of the preliminary injunction, with briefing to take place during late April and early May, and oral argument to be held on May 16, 2025.
While questions remain regarding what would qualify as an “individualized assessment” or “particularized assessment” under the D.C. Circuit’s order, it would appear reasonable to view the order as preventing the wholesale “deletion” of the CFPB (leaving an agency without any staff to conduct statutorily-mandated duties). The D.C. Circuit’s order provides that the CFPB leadership would have to conduct a “particularized assessment” of whether the employees to be terminated are unnecessary to the performance of statutory duties before conducting any RIF. Such an assessment would certainly be the subject of new litigation if it were the basis for a RIF of most of the CFPB’s staff, and it would likely need to be sufficient to pass muster before the court, even if it only targets a smaller subset of employees. In addition, the D.C. Circuit’s order would still prevent wholesale work stoppages—like the one on February 10, which was a focus of the District Court’s opinion—because the D.C. Circuit would only allow work stoppages that essentially wouldn’t interfere with the CFPB’s statutory duties. Based on this, it does appear that the CFPB will remain an agency with a substantial workforce when permanent Director McKernan takes the helm in a month or two.
That being said, neither the preliminary injunction nor the D.C. Circuit’s stay appear to require any particular level of activity from the CFPB. Although the preliminary injunction requires the CFPB to “ensure that employees can perform their statutorily mandated functions,” it does not require those functions to be performed at any particular speed or amount. This only requires that the CFPB’s employees are able to perform such functions, e.g., not be subject to a stop-work order. As I discuss further below, even with the preliminary injunction, CFPB operations under the current acting leadership, and soon its permanent leadership, can and will look very different than under former Director Chopra.
II. The District Court’s Opinion
It is worth diving into the District Court’s opinion in the case, because it provides a great deal of insight about what has been happening at the CFPB under the current acting leadership, discusses the court’s reasoning for its preliminary injunction, and previews issues that may come up in the appeal. The District Court’s opinion is detailed—112 pages long—and leaves little doubt about the court’s reasoning for the preliminary injunction. Essentially, the court found that the plaintiffs, which include the National Treasury Employees Union (NTEU), the NAACP, the National Consumer Law Center, and others, are likely to succeed on the merits of their claims. It also concluded that the plaintiffs face irreparable harm in the absence of relief and that the public interest strongly favors maintaining the legal status quo while the litigation proceeds, noting, “the Court cannot look away or the CFPB will be dissolved and dismantled completely in approximately thirty days, well before this lawsuit has come to its conclusion.”
A. The Court’s Overall View of Events Inside the CFPB
The court reviewed a substantial evidentiary record, including declarations from current and former CFPB staff, internal emails, official agency memoranda, and contemporaneous statements from leadership. The court characterized a February 10, 2025 email from Acting Director Vought, in which the Acting Director told staff “please do not perform any work tasks,” as an across-the-board stop-work order that brought most agency operations to a halt. In that email, employees were instructed not to perform any tasks without specific authorization. The court found that personnel were placed on administrative leave, the agency’s public-facing website went offline, contracts were terminated, and access to the consumer complaint system was reportedly disrupted.
The CFPB had argued in the case that it planned to run a “more streamlined and efficient bureau,” which means that “there will continue to be a CFPB.” The CFPB argued that an earlier February 8th email from the Acting Director, in which he stated, “I am directing that, effective immediately, unless expressly approved by the Acting Director or required by law,” had essentially been the operative stop-work order, which expressly allowed for work “required by law.” The CFPB’s brief in the case stated, “Acting Director Vought’s pause does not apply to agency activities ‘required by law[.]’”
But after reviewing—and extensively citing—the record, the court found that these changes at the Bureau were not, as Vought’s team had characterized them, merely temporary efforts to pause agency operations to facilitate the leadership transition. Rather, the court concluded that these changes were a deliberate and urgent effort to carry out a broader plan to dismantle the agency from within, and that the defendants’ assertions otherwise were “disingenuous.” It cited testimony that detailed how officials were working with the Office of Personnel Management (“OPM”) to implement a RIF, aiming to eliminate almost the entire staff within 30 days. Several statements from internal CFPB leadership suggested that the plan was to reduce the agency to five statutorily required positions and leave the rest of its infrastructure—including personnel, data systems, regional offices, and statutory functions—effectively shuttered. The court found these plans were already well underway by the time the plaintiffs filed suit, stating that, “by February 10, the agency was barreling full speed ahead in an effort to dismantle the agency completely by the end of the week.”
B. The Court’s Reasoning that the Preliminary Injunction Was Warranted
The court held that the plaintiffs satisfied all four requirements for a preliminary injunction: they demonstrated that they were likely to succeed on the merits, that they would face irreparable harm without immediate relief, that the harm to the plaintiffs outweighs any potential harm to the defendants, and that putting a hold on the agency’s shutdown is in the public interest.
With respect to the merits, the court’s opinion centers on a fundamental tenet of constitutional and administrative law: executive officials are bound by the laws Congress has enacted. The Dodd-Frank Act not only created the CFPB; it also assigned it specific responsibilities and mandated that it carry out ongoing functions, including supervision, enforcement, data collection, and public outreach. For example, the CFPB is required by statute to maintain certain internal offices, such as the Office of Fair Lending, the Office for Older Americans, the Office of Financial Education, and others. It must also operate a centralized consumer complaint system, publish regular reports to Congress, and carry out enforcement under a suite of federal consumer financial laws. According to the court, these are not optional programs.
Although the court acknowledged that agency leadership has discretion over how to prioritize work, allocate staff, and make strategic decisions, it drew a clear line between overhauling policy under a new administration and wholesale suspension of statutorily mandated operations. The court found that the actions taken by the current leadership crossed that line. The court stated:
“What happened in February was not merely a realignment of priorities. The Court has found after an evidentiary hearing and the review of an extensive record, that the plaintiffs are likely to establish that the defendants stopped all work, and that they took, and plan to take, additional concrete steps to dismantle and shut down the agency entirely, in violation of statutory mandates…. And it is likely to be shown that in doing so, the defendants overstepped their statutory and constitutional authority and usurped the power of the members of Congress, who were democratically elected by the people in every state in the union.”
In the court’s view, the mass termination of employees, the dismantling of internal infrastructure, and the suspension of virtually all agency operations were not permissible exercises of discretion—they were likely to be shown to be ultra vires actions in direct conflict with the agency’s statutory purpose. The court also found that work to dismantle the agency continued after the February 14th consent order (referenced above and by the D.C. Circuit in its administrative stay) that froze the CFPB in place. The court stated that, “the record also establishes that even with the consent order in place, the effort continued over the next two weeks; the work stoppage remained in effect, and the shutdown was very much alive, although temporarily stalled by the Court.
The court then considered whether waiting for the full case to play out would cause “irreparable harm” to the plaintiffs. The court explained that this type of harm must be real, immediate, and beyond the reach of later remedies—and held that this standard was met. The court found that RIF notices were prepared, employees were already on administrative leave, contracts were being terminated, and core systems were being deactivated. The court reasoned that once the agency was dismantled, there would be no meaningful way to restore its operations or the jobs lost, even if the plaintiffs ultimately prevailed.
The court also pointed to serious individual consequences, including the loss of health insurance for employees with ongoing medical needs, and the disruption of public-facing functions that directly serve consumers. The court cited to one plaintiff passing away awaiting help with a student loan issue, and another being left unable to report financial fraud in the wake of a natural disaster. The court found that these were not hypothetical harms, but real-world consequences making immediate intervention necessary.
In its analysis of the final two preliminary injunction factors—the balance of equities and the public interest—the court found that both strongly favored the plaintiffs. While the defendants argued that the public has an interest in allowing the President to implement policy priorities, the court emphasized that this case is not about policy disagreements or resource allocation, stating, “what happened in February was not merely a realignment of priorities.” The court found that the issue was whether executive officials can lawfully dismantle an agency created by Congress, stating that, in shutting down and dismantling the CFPB, the defendants likely “overstepped their statutory and constitutional authority and usurped the power of the members of Congress, who were democratically elected by the people in every state in the union.” The court found that an injunction serves the public interest by preserving congressional intent and preventing constitutional overreach. The court also found that if it denied the injunction, the dismantling of the CFPB would be “swift, complete, and irreversible,” and thus, “an injunction advances the public interest.” The court also cited amicus briefs from states, members of Congress, and public interest organizations supporting the view that shuttering the CFPB would disrupt consumer protection nationwide and inflict institutional damage that could not easily be repaired.
C. What the Court Ordered
I’ve outlined the preliminary injunction above (as well as the D.C. Circuit’s order partially staying the injunction), so I will only briefly discuss the injunction here. It is notable that the District Court’s preliminary injunction requires the CFPB to ensure employees can perform their statutorily mandated functions, but does not technically require that any specific functions actually be performed, tasks completed, or work performed at any particular pace or level. In addition, the CFPB’s acting leadership still has the discretion to set policy priorities in conducting those statutorily-mandated functions, and control over any other discretionary actions of the CFPB. Case in point, the CFPB recently announced that it would not enforce, and may possibly rescind, the CFPB’s Nonbank Registry Rule, which I wrote about here. In addition, Acting Director Vought has reportedly ordered an agency-wide review of all past guidance documents, with instructions to rescind any that impose obligations not grounded in statute or regulation.
Although the preliminary injunction would (even under the D.C. Circuit’s partial stay) tie the acting leadership’s hands with respect to staffing decisions (which arguably goes too far), the amount and type of work performed by the CFPB is still in the hands of the new administration. For this reason, despite this NTEU lawsuit, the CFPB under the current and new permanent leadership will look very different from the agency under former Director Chopra.
III. Takeaways for the Industry
Whatever your take on the drama inside the CFPB, without action by Congress, the Bureau will continue to exist, and the laws the agency oversees will still be on the books. In addition, many of those laws have provisions with private rights of action, and state agencies can enforce those laws as well. This means that it would be prudent to continue operating as normal, because there is still potential liability and reputational risk associated with noncompliance.
With respect to the CFPB though, at a minimum we can expect enforcement to have a lower emphasis than it did under former Director Chopra. In addition, the CFPB’s recent announcement about potentially rescinding the Nonbank Registry Rule could presage a new effort at regulatory reform. The industry should focus on encouraging the new leadership to undertake that effort. That being said, the recent court opinions do appear to indicate that the CFPB will not be wholly “deleted” anytime soon, and the statutorily-mandated functions of the CFPB, such as the supervision and consumer complaint functions, will resume at least at some level. This gives us another reason to keep focused on consumer compliance.
If you have questions or would like to discuss how this may affect your organization’s compliance obligations or interactions with the CFPB, please email me at rich@garrishorn.com.
