Summary
- Appeals court permits Trump to resume CFPB layoffs.
- Injunction blocking firings overturned by court.
- Unions ruled lacking legal challenge standing.
- Layoffs hitting about 90% of staff.
- Dissent cites constitutional separation of powers concerns.
Significant personnel reductions at the Consumer Financial Protection Bureau, a watchdog for banks and fintech firms that has long been singled out by congressional Republicans and far-right Trump supporters, are made possible by the decision.
A preliminary injunction granted to agency workers by a US district judge in March was revoked by the appeals court panel by a vote of 2-1.
The major downsizing of the CFPB by Trump appointees, according to labor organizations that represent CFPB employees, effectively destroyed the agency and went beyond their constitutional powers.
"We hold that the district court lacked jurisdiction to consider the claims predicated on loss of employment,"
said the ruling.
"Accordingly, we vacate the preliminary injunction."
Judges Gregory Katsas and Neomi Rao, who were appointed to the court by Trump during his first term, supported the decision.
Judge Cornelia Pillard, who was appointed by Democrat Barack Obama in 2013, dissented, supporting the district court's finding that a significant reduction in the CFPB's size amounted to the agency's demise.
Pillard stated that although the president has significant control over the CFPB, the administration cannot "decide that the country would benefit most if there was no Bureau at all," and that only Congress has the right to revoke the legislation that established the CFPB.
Established in the aftermath of the global financial crisis in 2008, the CFPB oversees a range of consumer issues in the United States, including credit cards, debt collection, and mortgages.
Russell Vought was appointed CFPB director by Trump in February. The conservative plan known as Project 2025, which advocated for the agency's dissolution, was largely conceived by Vought, who now serves as the head of the White House Office of Management and Budget.
In support of the appeals court's decision on Friday, Attorney General Pam Bondi said it would allow the CFPB "to right-size itself in accordance with the law to best serve the American people."
"This decision could lead to widescale firings, which would result in the cessation of the Bureau's important work protecting consumers,"
said NTEU president Doreen Greenwald, adding that the CFPB has returned more than $21 billion to consumers since its establishment in 2011.
The union can appeal Friday's decision to the full appeals court.
What legal arguments did the appeals court use to approve the layoffs?
The court ruled that the district court lacked jurisdiction to block the layoffs directly. Employment-related claims of federal employees must be addressed through the specialized federal employee grievance and review procedures established by the Civil Service Reform Act, not through immediate court injunctions.
The court held that the administration's layoff decisions were not "final agency actions" subject to immediate judicial review under the Administrative Procedures Act. Since the layoffs had not been fully carried out or finalized, the courts should not intervene preemptively.
The majority opinion emphasized respect for the executive branch's authority to manage agency operations and personnel decisions without excessive judicial interference, underscoring separation of powers principles.