CFPB Nixes All Expert Witness Contracts in Enforcement Halt (1)

The Consumer Financial Protection Bureau canceled contracts with all expert witnesses in existing enforcement litigation as it purges more than $100 million in contracts across the agency, an indication the watchdog is planning to stop or significantly scale back its enforcement proceedings.

While the CFPB doesn’t use expert witnesses in every case, canceling all of the contracts confirms the agency under acting Director Russell Vought is taking a sledgehammer to its enforcement work.

“If they were going to continue any litigation, they would’ve examined which cases to continue before eliminating expert witnesses,” said Jesse Silverman, counsel at Troutman Pepper Locke LLP and a former CFPB enforcement attorney.

The CFPB contracts canceled under Vought include 102 that provided services to the agency’s enforcement division. The Office of Management and Budget, where Vought serves as director, confirmed the total dollar value of the cuts.

Vought previously ordered a freeze to all CFPB operations, including litigation, but hasn’t said whether all cases will be dropped.

Among those 102 contracts were all expert witness contracts, according to current and former CFPB employees who were granted anonymity to discuss internal bureau matters.

Some enforcement cases don’t involve expert witnesses, while others need multiple experts to help prove the CFPB’s theory of a case, said Lucy Morris, a former CFPB deputy enforcement director.

“It certainly suggests that at least some of these cases may be dropped because there’s not a will to litigate them by the current administration,” Morris, now a Hudson Cook LLP partner, said.

While state attorneys general could pick up some of the enforcement slack, their resources and access to data are limited, she added.

The CFPB’s enforcement efforts resulted in more than $20 billion returned to harmed consumers since the agency opened its doors in 2011.

Eliminating enforcement would allow scammers to go unpunished, said Steve Hall, the legal director at Better Markets, a financial regulatory advocacy group.

“There will no punishment, no deterrence, and no recovery of the ill-gotten gains that are taken from consumers by unscrupulous financial companies on a daily basis,” he said in an email to Bloomberg Law.

Workforce Cuts

The cancellation of the contracts, confirmed by OMB on Feb. 11, came on the same day that Vought and the new CFPB leadership fired around 70 agency probationary employees. Many of those were enforcement attorneys, including some working on active cases.

The purge of expert witnesses, the firing of provisional employees, and the potential for deep cuts to the agency’s staff in the coming days as part of a broader federal government reduction in force means that enforcement will likely stop altogether—and for some time, Silverman said.

Elon Musk’s Department of Government Efficiency is also poring over CFPB financial data.

It’s possible that Jonathan McKernan, President Donald Trump’s nominee to be the next CFPB director, could bring back a smaller enforcement force to do more targeted actions.

But if he doesn’t, consumers and the financial system may be put at risk, Morris said.

The CFPB was created in the wake of the 2008 financial crisis, where abusive mortgage lending led to a wave of foreclosures and nearly toppled the financial system.

A review of cases to determine which should continue and which didn’t have merit is a good start for any new CFPB director.

But a wholesale elimination of enforcement poses significant risks, Morris said.

“If you don’t have enforcement, and you don’t have a CFPB, that creates more risk to consumers and the financial marketplace,” she said.