CFPB Transfers Active Litigation to DOJ as Funding Dwindles (1)

The Consumer Financial Protection Bureau is transferring all of its active litigation to the Justice Department as the Trump administration moves to wind down the federal consumer finance watchdog.

The CFPB’s remaining enforcement actions, any appellate cases, and litigation over agency regulations—including a case challenging its open banking rule—will now be handled by DOJ attorneys, according to multiple people with knowledge of the move who requested anonymity to discuss internal bureau matters.

The transfer comes after acting CFPB Director Russell Vought informed a court this month that the agency is set to run out of money and shutter operations early next year. The DOJ’s Office of Legal Counsel had determined that the CFPB couldn’t seek further funding from the Federal Reserve because the central bank wasn’t profitable.

Democrats and even some Republicans, such as Texas Attorney General Ken Paxton, have disputed that theory, but it has yet to be challenged in court.

The DOJ declined to comment. The CFPB didn’t immediately respond to a request for comment.

“The Administration is transferring away all of the CFPB’s active litigation, critical work that the CFPB does to return billions of dollars directly to Americans cheated by big banks and giant corporations,” Sen. Elizabeth Warren (D-Mass.), the ranking member of the Senate Banking Committee, said in a statement. “Nobody is fooled about the Trump-Vought end game, and the courts must uphold the law.”

The move also drew objections from the CFPB’s union. “CFPB attorneys are afraid DOJ will dismiss these cases,” Cat Farman, the union’s president, said in a statement.

Few Remaining Cases

The CFPB has only a handful of active enforcement cases remaining in litigation, the most prominent being a case it filed in January against credit reporting giant Experian Plc. The agency under Vought has voluntarily dismissed more than 20 cases since he took over in February.

Other CFPB cases, including one against financial technology company MoneyLion Inc., have either settled or are in the final stages of settlement negotiations. It’s unclear what will happen to those cases, the people with knowledge of the litigation move said.

Much like the cases in federal district courts, most of the appellate cases involving CFPB enforcement actions—such as cases against CashCall Inc., Nationwide Biweekly Administration Inc., and Nexus Services Inc.—have already seen panel rulings. The next steps in those cases isn’t certain at this point.

Likewise, most cases challenging Biden-era CFPB regulations have been resolved or placed on hold, as judges vacated some previous rules while the Trump administration’s CFPB plans to rewrite others.

In one high-profile case that could still face further litigation, the CFPB is preparing an update to its Biden-era open banking rule following a challenge from the Bank Policy Institute and two co-plaintiffs.

The DOJ already represents the CFPB in a case challenging the Trump administration’s bid to fire most of the agency’s employees, and it would also represent the bureau in any litigation before the US Supreme Court.

The 2010 Dodd-Frank Act says the CFPB “may” commence civil actions against violators of federal consumer finance law, but the DOJ has the authority to take on cases where no agency is designated to do so by law.

Prior to the CFPB opening its doors in 2011, the DOJ handled cases under the Servicemembers Civil Relief Act because no other agency had the power.

A DOJ takeover may raise thorny questions about the CFPB’s unique authority to bring claims that a company engaged in unfair, deceptive, or abusive acts or practices. It’s also unclear whether the DOJ could open new investigations or send civil investigative demands to companies, former CFPB officials say.