CFPB leaders planned to gut the bureau, fire 1,175 employees

The Trump administration had intended to gut the Consumer Financial Protection Bureau and fire 1,175 employees in statutorily required offices, according to emails submitted in a court battle with the bureau’s union.

On Friday, emails submitted by the Justice Department show that the CFPB under acting Director Russell Vought sought permission from the Office of Personnel Management for a reduction in force to eliminate the offices of supervision and enforcement. The emails appear to be a smoking gun in a lawsuit filed by the National Treasury Employees Union against Vought. The CFPB’s union has claimed Vought has been illegally dismantling the agency. Justice Department lawyers have countered, saying Vought is following the law as part of the normal changeover in administrations. It also claims the CFPB is performing its mandated work.

The firings never occurred because the National Treasury Employees Union and consumer groups sued Vought last month to stop any mass firings. 

Adam Martinez, the CFPB’s chief operating officer and chief human capital officer, sent an email listing the divisions, offices and units impacted by “a possible reduction in force.” The email was sent to Michael J. Mahoney, a human resources official at OPM, and it lists the number of employees to be fired in each division. Supervision appears to take the biggest hit with 528 positions slated to be eliminated, followed by the enforcement division, with 283 positions set to be cut. 

Martinez is set to testify Monday at an evidentiary hearing before Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia. At a hearing on March 3, Berman Jackson questioned Trump administration lawyers about whether supervisory work, consumer response and other legally required CFPB functions are being performed. The Justice Department has said work at the CFPB has continued, although supervisory examiners and managers have told American Banker that it is not.

Many CFPB jobs and the bureau’s operations hinge on the court case.

For the first time in weeks, CFPB employees are being told via emails to resume work, according to the emails obtained by American Banker. Most of the bureau’s staff were placed on administrative leave on Feb. 8 by Vought and have received no communication from Trump administration officials. Vought currently holds two jobs  — he is primarily the director of the Office of Management and Budget — and Mark Paoletta, the bureau’s chief legal officer, also works at OPM. Paoletta in emails to staff has referred to himself as “dual-hatted.” 

Employees are waiting for Jonathan McKernan, a Republican board member of the Federal Deposit Insurance Corp., to be confirmed as the permanent director of the bureau before operations could potentially return to normal. 

On Thursday, McKernan’s nomination passed out of the Senate Banking Committee in a 13-11 party line vote. His nomination now goes to the full Senate, where he’s expected to be confirmed with Republican support. 

“The CFPB appears to be rising from the ashes,” said Jim McCarthy, chairman of consulting firm McCarthy Hatch and a founding member of the CFPB. 

Proof that the agency is operating again came Friday when the bureau published notices in the Federal Register. The CFPB is seeking to extend the comment period on a proposed rule to amend the Fair Credit Reporting Act, governing consumer-reporting agencies. 

“When you see the Federal Register posts that they’re doing official actions, it just gives me the indication that there’s work being done because somebody inside the bureau is saying these are the directions we want to take,” McCarthy said.