A federal appeals court on Friday overturned a lower court ruling that had blocked the Trump administration’s efforts to dismantle the Consumer Financial Protection Bureau (CFPB), now clearing the way for the federal government to resume mass firings at the agency.
In a 2-1 decision, the U.S. Court of Appeals for the District of Columbia Circuit said workers’ unions and pro-consumer groups that use CFPB services did not have the right to bring the case to federal court and that the lower court judge acted outside its authority when it temporarily blocked the dismantling of the CFPB.
“We hold that the district court lacked jurisdiction to consider the claims predicated on loss of employment, which must proceed through the specialized-review scheme” under laws governing the civil service, U.S. Circuit Court Judge Gregory Katsas wrote for the majority, joined by Circuit Judge Neomi Rao.
“If the plaintiffs’ theory were viable, it would become the task of the judiciary, rather than the Executive Branch, to determine what resources an agency needs to perform its broad statutory functions,” the judge said.
TRUMP ADMIN APPEALS DECISION BLOCKING DISMANTLING OF CONSUMER FINANCIAL PROTECTION BUREAU
But the court said its decision would not immediately take effect, giving lawyers representing CFPB workers and consumer groups the opportunity to appeal further, meaning any termination notices must still wait for now.
Still, the ruling affects the employment of roughly 1,500 workers at the CFPB after the firings were blocked in April by a trial court, which found at the time that the attempted layoffs violated a March injunction temporarily stopping the administration from shutting down the agency.
Although the administration has claimed in court they planned to keep the agency in a reduced form, officials have publicly spoken about dismantling it altogether.
Katsas and Rao, both appointees of President Donald Trump, also found that the administration sought to eliminate the CFPB, but still overruled the lower court after determining it lacked jurisdiction to block the mass firings.
Circuit Judge Cornelia Pillard, appointed by former President Barack Obama, wrote in a dissent that the lower court had acted properly when it blocked the administration from eliminating the CFPB.
“But it is emphatically not within the discretion of the President or his appointees to decide that the country would benefit most if there were no Bureau at all,” Pillard wrote.
Pillard also wrote that “the notion that courts are powerless to prevent the President from abolishing the agencies of the federal government that he was elected to lead cannot be reconciled with either the constitutional separation of powers or our nation’s commitment to a government of laws.”
An attorney for the plaintiffs, Jennifer Bennett, said the ruling threatened to leave the public unprotected from bad actors in the market for consumer finance.
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“Without the full force of the Consumer Financial Protection Bureau – an agency Congress created specifically to protect consumers – millions will lose critical safeguards against predatory financial practices,” Bennett said in a statement. “If this decision is allowed to stand, it will shift the balance of power toward corporations at the expense of American families’ financial security.”
The majority further ruled that other objections raised by the plaintiffs did not address final decisions made by the agency and, therefore, could not be reviewed in court.
The CFPB, which was established following the 2008 financial crisis, was a target of Elon Musk, who led the Department of Government Efficiency and its efforts to downsize the federal government before he stepped down earlier this year.
Office of Management and Budget Director Russell Vought was selected by Trump to serve as acting director of the CFPB, which he quickly attempted to dismantle.
Reuters contributed to this report.
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