CFPB in Crisis: Mass Layoffs Reshape the Bureau

2025 Brings Sweeping Cuts, Rule Rollbacks, and a New Enforcement Focus

(Note - all views are those of Fintech Compliance Chronicles/my personal views and not affiliated with any other organization)

(Additional Note - the image accompanying this article was generated by ChatGPT)

In what should be completely unsurprising to anyone who has been watching developments in Washington since January, Russell Vought, Acting Director of the CFPB, announced mass layoffs yesterday (Thursday, April 17) at the agency. This follows an appeals court ruling last Friday that lifted some components of a previously enacted freeze on reductions in force along with a demand to reinstate previously terminated employees.

In the original freeze, Judge Amy Berman Jackson issued 8 provisions as part of her ruling, which included requiring the Bureau to:

1. Maintain all records

2. Reinstate all employees terminated since the first wave of layoffs in February

3. Halt any RIFs and only fire employees for cause/performance

4. Rescind a February stop-work order along with any administrative leave

5. Provide employees with office space if they are to RTO, or permission to work remotely if they cannot

6. Continue the collection of complaints

7. Rescind all contract terminations

8. Confirm compliance by April 4.

The appellate decision affirmed all of the above except #2, #3, and part #4, meaning the Bureau did not have to bring reinstated employees back, RIFs could occur, and the stop-work order could also resume provided “statutory duties” aka the CFPB’s legal requirements could continue - with the caveat that a “particularized” or “individualized” assessment had to occur before taking these steps. All the other provisions including recordkeeping, office space/telework, complaints, restoration of contracts, and confirmation of compliance, remained in place.

Well, the assessments have presumably been completed (any bets on whether they actually were or not?) and late Thursday, news sources began reporting about a notice that was sent by Vought about the upcoming RIF which he framed as “necessary to restructure the Bureau’s operations to better reflect the agency’s priorities and mission.” He added that impacted employees will be able to access their systems until Friday evening and will be formally terminated by mid-June. The initial projections are that only 200 employees will be left at the Bureau when all is said and done, a nearly 90% cut.

Jackson is not thrilled and has ordered an 11AM hearing today on whether the layoff violated her initial order.

While we wait for the court process to play out, here’s a recap of what has been happening with the Bureau in 2025 - something we had planned to do anyway before the layoff news hit:

• February 6, 2025 - The implementation of the Medical Debt Credit Reporting rule, which would have excluded medical debt from credit reports effective March 2025, was suspended indefinitely. This resulted from the CFPB essentially deciding to file a motion to stay the proceedings in a lawsuit raised by the Cornerstone Credit Union League and the Consumer Data Industry Association challenging the rule. We covered the rule extensively when the initial rulemaking was announced and when the rule was finalized (also here).

• February 10, 2025 - With the aforementioned work stoppage, the Big Tech Digital Payment Rule focused on supervision of nonbank actors like Apple and Paypal that had taken effect on January 9 was essentially halted.

• March 26, 2025 - The CFPB asked a District Court to stay litigation in a case that had originally been filed against the Bureau challenging a rule that had been implemented last year applying Regulation Z provisions to BNPL providers. The Bureau added that it plans to revoke the rule.

• March 28, 2025 - The CFPB announces that it will not be enforcing its payday loan rule which would have gone into effect March 30, 2025. The rule would have prohibited lenders from attempting to withdraw payments from consumers after two failed attempts, and would have required notice to consumers before attempting to withdraw for the first time and a notice of the consumer’s rights when back to back attempts fail.

• April 3, 2025 - The CFPB concurred with an industry group’s motion to stay the compliance date of its 1071 Rule, which would have required financial institutions to collect and report data on loan applications for credit to small business with a special emphasis on underserved groups.

• April 10, 2025 - The House voted to overturn the CFPB’s overdraft rule, finalized in December 2024 and effective in January, that would have limited overdraft fees to $5. The Senate had already voted in favor of overturning the rule as well, which means the bill will now go to Trump for his signature. Estimates were that the rule would have slashed fees from an average of $35 per transaction down to $5 and saved 23 million households that end up having to pay these fees $5 billion a year.

• April 14, 2025 - The CFPB announced that it would not enforce a rule requiring registration of nonbank lenders with the Bureau along with having to disclose any agency or court orders concerning violations. The idea here was to have the ability to leverage work being done at local levels to potentially inform future rulemaking at a national level, but that’s a moot point now.

• April 15, 2025 - A federal court vacates the Credit Card Late Fee Rule after the CFPB admitted that it violated the CARD Act and APA by proposing the rule. The rule would have lowered late fees to $8 for issuers with >1 million accounts and eliminated inflation adjustments; we covered it extensively back when it was first announced (here and here).

• April 16, 2025 - Likely connected with the layoff news, the CFPB laid out its 2025 Supervision and Enforcement Priorities, which stated that 1) it would reduce the number of exams by 50% 2) it would aim to meet the 2012 ratio of 70% of supervision on banks and only up to 30% on nonbanks as opposed to what it says is now 60% nonbank focused and 40% banks. 3) it will pull out of multi-state exams and cede much of its enforcement to states. The piece about pulling back on nonbank supervision appears to fly in the face of Dodd-Frank which says that the Bureau “shall require reports and conduct examinations on a periodic basis.” We will have much more on these priorities in a followup post next week.

Interestingly, the one rule that has not been commented on by the Bureau is 1033, the Open Banking Rule. That has not stopped it from coming up in the courts, where the Financial Technology Association, a group that represents fintechs like Plaid, Stripe, and Wise, is challenging a lawsuit filed by a group of bankers including the Kentucky Bankers’ Association - essentially pitting traditional banks against the new guard. Meanwhile, the CFPB sits on the sidelines while this inter-industry fight plays out.

We’ll have more on the new priorities next week. In the meantime a ton of talent with deep regulatory experience has just hit the market as a result of this effective shutdown of the Bureau (assuming nothing changes as a result of the followup hearing today). If you’re hiring, they deserve your consideration and even if you’re not, they deserve your support.