Appellate court sanctions select terminations within Consumer Financial Protection Bureau
Federal Appeals Court Clears Way for Mass Layoffs at CFPB
In a significant ruling, a federal appeals court has overturned parts of a lower court's injunction that had blocked mass layoffs at the Consumer Financial Protection Bureau (CFPB). The decision, made by the U.S. Court of Appeals for the District of Columbia Circuit, allows the Trump administration to proceed with potential reductions-in-force (RIFs) that could impact up to 90-95% of CFPB staff.
The ruling, announced in mid-August 2025, was not without controversy. While the court allowed the administration to resume dismantling the agency, it delayed immediate effect of its ruling to permit rehearing petitions. This means that layoffs cannot proceed until after the review window passes.
Impact on CFPB Employees
The decision could drastically reduce the agency's workforce by roughly 1,500 positions, severely limiting operations. Affected employees and unions must now pursue remedies via civil service law mechanisms rather than federal court injunctions. Currently, CFPB staff have largely ceased investigations pending resolution.
Impact on the CFPB and Fintech Disruption in the Banking Industry
The ruling comes as the CFPB is shifting its focus to align with the Trump administration’s approach to shrinking the agency’s scope. With such significant staff reductions, the CFPB’s capacity to regulate and oversee fintech and traditional financial institutions may be substantially weakened. This could potentially slow consumer protections and regulatory enforcement linked to fintech innovation and financial services.
Consumer advocacy groups warn that this undermines consumer protections established after the Great Recession, potentially allowing predatory practices to persist.
The Road Ahead
The final outcome depends on further court reviews and potential administrative responses. The appeals court stayed certain provisions of the injunction, allowing agency leaders to terminate employees deemed unnecessary to the performance of their statutory duties. However, much of Berman Jackson's order stands, preserving the agency's data, reinstating previously canceled contracts, and striking down Vought's earlier stop-work order.
The CFPB's union has emphasized that specific provisions of Berman Jackson's order remain in effect. Meanwhile, Cat Farman, the president of the CFPB's union, has expressed concern that the acting director might use the permission to conduct RIFs to fire employees illegally.
Oral arguments before the appeals panel are set for May 16. The CFPB may send out a reduction-in-force notice to employees deemed unnecessary under the ruling. The article does not provide any additional context about the specific issues that led to the mass firings at the CFPB.
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The decision by the U.S. Court of Appeals for the District of Columbia Circuit to overturn parts of an injunction and allow possible reductions-in-force at the Consumer Financial Protection Bureau (CFPB) has significant implications for the financial industry and traditional banking businesses, as the agency's capacity to regulate and oversee them may be weakened by the potential staff reductions. The affected employees and unions must now pursue remedies through civil service law mechanisms.
