On April 16, the CFPB released an internal memo outlining major shifts in its supervision and enforcement priorities, signaling a retreat from several areas of regulatory activity. The next day, the Bureau issued formal reduction-in-force (RIF) notices to numerous employees, notifying them of termination effective June 16.
The supervision memo directs a significant reallocation of the Bureau’s focus and resources. Examinations are to be reduced by 50%, with an emphasis on collaborative resolutions, consumer remediation, and avoiding duplicative oversight. The CFPB will shift attention back to depository institutions, moving away from nonbanks that have increasingly been subject to Bureau exams in recent years. Enforcement will prioritize matters involving tangible consumer harm, particularly in areas of mortgage servicing, data furnishing under the FCRA, and debt collection under the FDCPA. The memo explicitly deprioritizes supervision of student lending, digital payments, remittances, and peer-to-peer platforms, and restricts the Bureau’s use of statistical evidence to support fair lending cases, limiting such actions to those involving intentional discrimination and identifiable victims.
The RIF notices cite structural realignment and policy shifts as the basis for the cuts and inform employees that the decision does not reflect performance or conduct. Following the issuance of the RIF notices, plaintiffs in ongoing litigation against the CFPB filed an emergency motion, arguing that the RIF appeared to violate an existing preliminary injunction. After an emergency hearing on April 18, Judge Amy Berman Jackson of the D.C. District Court ordered the CFPB to suspend its reduction-in-force and maintain employees’ access to the agency’s systems while legal proceedings continue, raising concerns that allowing the layoffs to move forward could permanently damage the Bureau’s ability to meet its legal obligations. The court set a follow-up hearing for April 28.
Putting It Into Practice: The current administration’s push to downsize the CFPB continues. While paused for the moment, a Bureau of only 200 employees will have a dramatic impact on the enforcement of the country’s federal financial services laws. Stay tuned to this space as we continue to monitor how the litigation plays out.