In order to determine if the Trump administration’s changes to the Consumer Financial Protection Bureau are legal, a federal judge has requested to speak with one of the agency’s senior executives personally—according to ABC News.
This comes after a tumultuous few weeks for the CFPB, including the firing of former Director Rohit Chopra and the appointment of Treasury Secretary Scott Bessent as Acting Director for the Bureau. The Trump administration has since nominated Jonathan McKernan, most recently a Director on the Board of the Federal Deposit Insurance Corporation (FDIC), as the next Director of the CFPB following a comprehensive review of all federal agencies by Trump to halt operations and changes in Bureau leadership.
The CFPB COO Adam Martinez and others testified at a hearing on Monday regarding the agency’s current state, according to U.S. District Judge Amy Berman Jackson, who voiced concerns that the CFPB might be “choked out of its very existence.”
Judge Jackson Seeks Further Context
Jackson became impatient with the lack of definitive responses from either side regarding the present status of the CFPB during a protracted hearing on Monday, March 3. The plaintiffs contended that the Trump administration was creating irreversible harm by gradually starving the CFPB, while attorneys with the Department of Justice contended that the relief sought by the federal unions who filed the complaint amounted to placing the agency in receivership.
“According to the plaintiff, the sky is falling,” Jackson said. “According to the defendant, if I issue the order, the sky will be falling.”
Jackson stated that if the plaintiffs can show that the government’s activities are inflicting irreversible injury, she may consider more remedies in addition to the preliminary injunction she is seeking to stop the CFPB’s deconstruction.
“I think what we’re talking about is interim oversight to make sure that it hasn’t been choked out of its very existence before I get to rule on the merits,” Jackson said.
The CFPB has been operating under a stop work order for the past month. Martinez contended in a sworn court filing last week that the modifications are just a “common practice at the beginning of a new administration.” Jackson expressed doubt that the current state of affairs at the CFPB is routine.
“One of the big defenses of all this is that this is normal, that this is what happens when the new team comes to town, and I’m just not sure that’s true at all, at least not since I’ve been here,” Jackson said. “Are you telling me that … when President Reagan took over from President Carter—on top of freezing regulations and enforcement and litigation—fired all provisional employees, shut the building, stopped all work and said the funding should stop?”
CFPB: A History of Controversy
According to the report, attorneys for the Department of Justice emphasized that the Trump administration is working to strengthen rather than dismantle the CFPB.
“You can’t blow it up, but why should you be able to starve it to death?” Jackson asked.
On February 7, however, Elon Musk posted “RIP CFPB” on X, the same day that employees were given notices of termination.
“Acting Director [Russell] Vought wants to have a more streamlined and efficient bureau, not to blow it up,” responded a DOJ attorney.
Following the 2008 financial crisis, Congress created the CFPB as an independent agency through the historic Dodd-Frank Act. It is a consumer watchdog that works to shield American households from dishonest and unfair financial services sector practices.
Its supervision covers everything, including data collecting, bank fees, student loans, credit cards, and mortgages. The CFPB is legally empowered to create new regulations and to fine businesses that violate them. The CFPB reported that it has recovered $20.7 billion for American consumers since its founding in 2011.
“There’s been a lot of conversation, both in and out of this hearing room today, conversations about a co-president, referencing Elon Musk, referencing the work that DOGE is doing,” said Alabama Republican Sen. Katie Britt. “I think it’s important to remember that President Trump ran on this. I mean, he said we’re going to look for wasteful spending across our government.”
Early CFPB Ruling Shifts Toward Nullification
In a letter, on February 12, Democrats pledged to support the agency. The letter is signed by all Senate Democrats and the two independents—Sen. Angus King, of ME, and Sen. Bernie Sanders, of VT—who caucus with them.
“We beat back all prior efforts to gut this agency, and we will fight this latest attack in Congress, the courts, and the public,” lawmakers wrote. “It will fail.”
Despite the U.S. Supreme Court ruling 7-2 that the funding of the CFPB was lawful and in accordance with the Appropriations Clause of the Constitution on On Thursday, May 10, the current standing of the CFPB has since changed.
The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America, tested the Appropriations Clause of the U.S. Constitution that reads: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
In May 2024, the U.S. Court of Appeals for the Fifth Circuit had previously held that the CPFB’s funding was unconstitutional and ought to be subject to Congressional appropriations; the Supreme Court’s judgment overturns that decision.
Further, since its founding on July 21, 2011, in the wake of the 2007–2008 financial crisis, the CFPB has been scrutinized despite its mission to shield customers from dishonest financial institution activities. The current U.S. Senator Elizabeth Warren, who was a Harvard Law School professor at the time, created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
So, what now? What’s to come? Only time will tell as Americans make their way through Q1.
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