CFPB Shutdown Hearing Probes Courts’ Sway Over Trump-Era Firings

Appellate judges in Washington grappled with whether a lower court overstepped by blocking Russell Vought, acting chief of the Consumer Financial Protection Bureau, from firing 90% of the agency’s staff and otherwise shutting it down.

At a nearly three-hour hearing Tuesday, judges on the full US Court of Appeals for the District of Columbia Circuit tested how far courts should go to limit the Trump administration’s moves rolling back the consumer finance watchdog created after the 2008 financial crisis.

Eric McArthur, a Justice Department attorney representing the CFPB, argued the preliminary injunction—since vacated by a three-judge DC Circuit panel—was based on erroneous facts. There was never a final decision to shut down the agency, and the CFPB employees who sued to stop Vought should’ve brought their claims through the Merit Systems Protection Board, he added.

“Here the MSPB has exclusive jurisdiction over reinstatement of employees,” he said.

But McArthur faced stiff pushback, most notably from Judges Cornelia T.L. Pillard and Patricia A. Millett, both Obama appointees. Pillard sat on the panel that vacated the preliminary injunction and dissented from the opinion.

“What you want us to hold is that the CSRA has tentacles that reach across the entire litigation system” and block courts from preserving offices that Congress created, Millett said, referring to the Civil Service Reform Act that created the MSPB.

The National Treasury Employees Union and other plaintiffs sued to block Vought from gutting the CFPB last February, just after he took helm of the agency and kept in place a broad stop-work order originally set by Treasury Secretary Scott Bessent, who briefly served as acting director

The hearing centers on whether federal courts can block Donald Trump’s administration from effectively shutting down the CFPB by firing most of its staff, and how far judges may go in policing that kind of “shutdown‑by‑personnel” strategy.

What the case is about

• Acting CFPB chief Russell Vought ordered a halt to most Bureau work, closed its headquarters, and pursued plans to fire roughly 90% of CFPB employees as part of a broader effort to neutralize the agency without repealing Dodd‑Frank.

• The National Treasury Employees Union and other plaintiffs sued, arguing the administration cannot abolish or cripple a congressionally created agency through mass RIFs, funding refusals, and stop‑work orders, and that those steps violate Dodd‑Frank and separation‑of‑powers limits.

Procedural posture going into the hearing

• In March 2025, District Judge Amy Berman Jackson issued an injunction barring broad layoffs, funding clawbacks, and other shutdown moves, keeping most staff on payroll and blocking a planned RIF covering about 95% of employees.

• A divided D.C. Circuit panel later vacated that injunction but stayed its mandate, holding that an overarching “decision to shut down” the CFPB was not final agency action reviewable under the APA, and suggesting most personnel issues belonged in civil service channels.

• In December 2025, the full D.C. Circuit granted rehearing en banc in NTEU v. CFPB (or NTEU v. Vought), wiped out the panel decision, and set the February 24, 2026 argument; with the panel opinion vacated, Judge Jackson’s core constraints on a full shutdown remain effectively in place pending the en banc ruling.​

What the appellate judges are probing

• At the en banc argument, several judges pressed DOJ lawyers on why courts supposedly lack power to stop an executive branch from terminating nearly all CFPB staff, questioning whether that position would leave Congress’s decision to create the Bureau meaningless if a president can close it by firing its workforce.

• The court is wrestling with how to characterize the administration’s actions: as unreviewable internal personnel and management decisions, or as a coherent agency‑level policy to close or disable the CFPB that triggers APA review and constitutional scrutiny.

• Judges also explored what limits, if any, the Constitution or civil service laws place on an acting director’s ability to use mass firings and funding maneuvers to nullify a statutory mandate without going back to Congress.

Why the decision matters

• Upholding broad judicial authority here would reinforce that presidents cannot “zero out” or dismantle independent agencies unilaterally, and that courts can enjoin shutdown strategies that effectively repeal statutes by executive action.

• Ruling for the administration could give the White House far more leverage over independent financial regulators in future administrations, signaling that large‑scale personnel and budget tactics are largely beyond judicial review so long as Congress hasn’t enacted an explicit anti‑shutdown rule.