U.S. District Judge Amy Berman Jackson on Friday halted the Consumer Financial Protection Bureau's attempt to lay off the vast majority of its employees and gut the agency.
Her order comes after the CFPB had sent reduction-in-force notices to more than 1,400 staffers across the agency on Thursday.
The CFPB had proceeded with layoffs after a three-judge panel last week had ruled the agency could conduct a reduction in force if it made "a particularized assessment" to determine which employees were "unnecessary" for the bureau's performance of its statutory duties.
But the CFPB's union immediately took legal action seeking to halt the mass layoffs, saying the agency had not in fact conducted the thorough assessment required by that three-judge panel.
Judge Jackson appeared skeptical as well.
She said in her order on Friday that the CFPB appeared to be "thumbing their nose" at her own court as well as the appeals court.
Judge Jackson scheduled a hearing to consider the legality of the mass layoffs for April 28.
Mass layoffs would have gutted the agency
With this reduction in force and earlier layoffs of probationary workers, the CFPB intended to retain just 207 of the 1,690 employees it had before the Trump administration began its efforts to shrink the bureau and reduce the scope of its work.
"An approximately 200 person agency allows the Bureau to fulfill its statutory duties and better aligns with the new leadership's priorities and management philosophy," wrote CFPB chief legal counsel Mark Paoletta in a declaration filed Friday morning.
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Laurel Wamsley is covering what's happening at CFPB. If you have a tip, you can contact her securely on Signal at laurel.96.
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Staffers at the agency began receiving reduction-in-force (RIF) notices on Thursday afternoon.
"This RIF action is necessary to restructure the Bureau's operations to better reflect the agency's priorities and mission," said the notices sent to CFPB staff.
But the union pushed back against the mass firings, saying the CFPB could not have "made a 'particularized assessment' of each employee's role in the three-and-a-half business days since the court of appeals imposed that requirement."
"It is unfathomable that cutting the Bureau's staff by 90 percent in just 24 hours, with no notice to people to prepare for that elimination, would not 'interfere with the performance' of its statutory duties," wrote attorneys representing the CFPB employees union in their filing against the mass firings.
The CFPB union also submitted to the court a declaration from an agency employee under the pseudonym Alex Doe, who said they were on the team charged with planning the RIF.
The employee describes a hasty and stressful process that was managed by a member of Elon Musk's Department of Government Efficiency (DOGE) team.
The employee said in the filing that team members raised the concern that there was a court order requiring that they do a particularized assessment, but "they were told that all that mattered was the numbers."
The division head of the Office of Research also said in a declaration that his team had been cut from 57 employees to three staff "who lack certain technical expertise required to fulfill the required functions" — and that he and senior leaders in his unit had not been consulted about the reduction or how they would impact the unit's "mandatory statutory duties."
New direction for the CFPB
The layoff notices came a day after after the agency's chief legal counsel sent a memo to CFPB employees on Wednesday evening that sets a new direction for the bureau.
In the memo, chief legal officer Mark Paoletta said that the Bureau would lean on states to carry out more enforcement and supervision activities, arguing that doing so would allow the agency to "to focus on tangible harms to consumers."
Paoletta also said the bureau would shift its focus back to banks and depository institutions such as credit unions.
He added the bureau would "deprioritize" a number of areas it has regulated in recent years, including medical debt, peer-to-peer platforms, and digital payments.
The last item is notable as Elon Musk, who has tweeted "CFPB RIP", is building a digital payments platform –- a platform that would ostensibly be under CFPB's oversight. In February, Musk's DOGE team entered the bureau's Washington headquarters and took control of key systems.
The CFPB, which was founded in the wake of the 2008 financial crisis, has become a target of the Trump administration as well as some in Silicon Valley and on Wall Street, who say it overreaches in its regulation.
Consumer organizations criticized the bureau's reorientation as described in Paoletta's memo, saying it marked a significant retrenchment in its mission.
"The CFPB cannot simply shirk the consumer protection responsibilities Congress gave it and expect states to enforce federal law," said Lauren Saunders, associate director of the National Consumer Law Center.
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