E. Tammy Kim observed in The New Yorker recently that the Consumer Financial Protection Bureau (CFPB) has become a “zombie regulator.” The question is how long that will last. Or if it might be better off, for itself and for industry, just making policy, including that which would be favorable for industry.
We are under no illusions about where Office of Management and Budget (OMB) director and Acting CFPB chief Russ Vought would like to take the agency. It is quite clearly to the grave. Or, at most, relegation to an agency on paper with a figurehead Director, and nothing more.
Mr. Vought’s efforts to date reflect a remarkable theory of executive prerogative, or unfettered discretion, to enforce the laws that Congress passes and predecessors in the Oval Office have signed – including the 2010 Dodd-Frank Act, which established the agency and various statutorily-mandated functions in the aftermath of the Global Financial Crisis – as he and President Trump deem appropriate.
The efforts to close the Bureau to date include, but are certainly not limited to, (1) cancelling office space leases and mission-critical contracts, (2) twice attempting mass reductions in force (RIFs), (3) a short-lived refusal to request funding from the Federal Reserve on the back of a textualist “gotcha”-styled argument that the Office of Legal Counsel at the Department of Justice (DOJ) decided to credit, (4) a functional halt to supervision and implementation of an examiner “pledge” seemingly meant to offend the sensibilities of examiners, (5) the dismissal of at least 22 enforcement actions, and (6) the abandonment of numerous rulemakings initiated by Mr. Vought’s aggressive predecessor, Rohit Chopra.
Republicans in Congress have also played ball, rescinding certain final rules with the Congressional Review Act and shrinking the agency’s budget in reconciliation. The effort has even included the Council of Economic Advisers (CEA) publishing a report estimating that the CFPB has cost consumers between $237 and $369 billion in “fiscal costs, increased borrowing expenses, and reduced originations,” while other sophisticated observers have pointed out flaws in the CEA’s methodology.
Mr. Vought even gloated about the dilapidated status of the agency on a podcast in October, offering a prediction of its future: “We don’t have anyone working [at the CFPB] except our Republican appointees and a few career [staff] that are doing statutory responsibilities while we close down the agency… We want to put it out, and we will be successful probably within the next two [or] three months.” All this while Deputy Assistant Attorney General Eric McArthur, DOJ counsel representing the CFPB, stood before a panel of 11 D.C. Circuit judges on February 24th and reiterated that the administration has never had any intent, or final plan, to close the agency. Please, esteemed jurists, suspend disbelief.
So far, the only roadblock to the Trump administration’s efforts to gut the Bureau has been the courts and the plaintiffs in the National Treasury Employees Union (NTEU) suit against Mr. Vought’s CFPB. In that litigation, District Court Judge Amy Berman Jackson initially entered a prescriptive and likely overbroad preliminary injunction to halt activities aimed at effectively shuttering the agency. It was vacated on appeal before the D.C. Circuit granted a relatively extraordinary en banc rehearing petition and oral arguments before the full circuit panel followed in late February.
While we forego detailing the content of the hours-long en banc arguments, we expect the D.C. Circuit to ultimately remand the matter to the District Court with instructions to tailor the injunction. Where the litigation goes from there is anyone’s guess. And how the court ensures compliance – potentially something that sounds and looks a lot like judicial receivership – is also difficult to forecast. But maybe from there, Mr. Vought will decide he might want to use the watchdog agency’s powerful tools to achieve Trump administration deregulatory policy goals rather than as a unitary executive pet project.
We point to the more than 20 rulemaking efforts ongoing at the agency as a potential starting point for the regulator’s renewed participation in the political economy of the United States. Recent reporting has suggested the agency is shifting lawyers to that division to support rulemaking efforts. There is certainly much to do. And industry – including bank and nonbank lenders, remittance and consumer reporting firms, small-dollar lenders and fintechs – would be well positioned to benefit. We leave it to operators to decide if they prefer fragmentated regulation across states to nationwide policy coherence that might be much more favorable for industry.
That said, we certainly expect consumer advocates’ and the NTEU’s resistance project to continue. Ultimately, we might ask what Democrats potentially inherit in 2028, assuming the Presidential election tilts blue. Is it an agency at 5%, 20%, or 50% of what it was? And how fast might it return to its former status?
When industry describes pendulum swings, it is usually with distaste. If Democrats win in 2028, the pendulum will need some maintenance and grease before it can swing. But swing, it will.
Read more from our financial services team:
UK Education Policy in 2026: Navigating Reform, Risk, and Investor Opportunity
The Big Bank Bluff: Frosty Rhetoric but Friendly Rules
The Deregulatory Pendulum Swing: Life after a Neutered Consumer Financial Protection Bureau
