The full D.C. Circuit Court of Appeals signaled skepticism Tuesday toward the Trump administration's efforts to shut down the Consumer Financial Protection Bureau, as an en banc panel heard arguments over a district court injunction that has maintained the agency's operations for more than a year.
The en banc panel decided to rehear the case after a three-judge panel, led by Donald Trump appointees, previously determined that the National Treasury Employees Union and its nearly 1,500 employees should have brought their claims before the Merit Standards Protection Board. The earlier panel also ruled that U.S. District Judge Amy Berman Jackson lacked jurisdiction to order an injunction in the case.
Justice Department attorney Eric McArthur argued Tuesday that Jackson's injunction has effectively forced the Trump administration to maintain the CFPB at the same staffing levels established during the Biden presidency. The injunction has prevented the bureau's leadership from implementing what the administration characterizes as lawful downsizing efforts.
"Our system of government cannot function the way it is supposed to if courts overstep their own authority and prevent the executive branch from carrying out lawful reforms for which the American people voted," McArthur said during oral arguments.
McArthur emphasized the temporal aspect of the dispute, noting that the administration is now more than a year into its term while still constrained by the district court's March 2024 injunction. He argued that the order "prevents the bureau's leadership from exercising their lawful discretion to carry out the president's deregulatory agenda by downsizing the CFPB."
The Justice Department attorney characterized the injunction as resting "on a series of legal, factual and equitable errors" and described it as "a serious affront to the separation of powers."
The union's attorney, Jennifer Bennett of Gupta Wesler, urged the court to reject the government's arguments. Bennett pointed to what she described as a clear record showing the Trump administration's efforts to undermine Jackson's authority and "kneecap the agency" before the judge could fully hear the union's case.
U.S. Circuit Judge Robert Wilkins, an Obama appointee, questioned Bennett about the potential consequences of allowing the agency's dismantling. "Why can't Humpty Dumpty be put back together?" Wilkins asked. "Why can't the agency just, at the end of the litigation, be stood up again?"
Bennett responded by citing testimony from the government's own witness, Chief Operating Officer Adam Martinez, who explicitly stated that harm to the public would be irreparable since no other federal agency performs the CFPB's consumer protection functions.
The union's attorney also highlighted the lengthy process required to establish the agency initially. She noted that a full year elapsed between Congress's passage of the Dodd-Frank Act in the wake of the 2008 global financial crisis and the CFPB's first operational day.
"Of course you can build an agency, but it would take a very long time to do it, and in the interim" the public would lack crucial consumer financial protections, Bennett argued.
The CFPB was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Congress enacted in response to the 2008 financial crisis. The agency's mission includes overseeing financial institutions and protecting consumers from predatory lending practices, unfair debt collection, and other financial abuses.
The current dispute represents a broader conflict between the Trump administration's deregulatory agenda and federal employee protections. The National Treasury Employees Union filed suit to challenge what it characterized as efforts to effectively eliminate the agency through massive staffing reductions.
The case also raises questions about judicial authority versus executive branch discretion in federal agency management. The Justice Department's position emphasizes presidential prerogatives in reorganizing federal agencies, while the union argues that such actions require proper procedural safeguards and cannot circumvent employee protection laws.
The timing of the case adds urgency to the legal questions involved. With the injunction having remained in place since March 2024, the Trump administration argues it has been unable to implement key aspects of its regulatory reform agenda.
The en banc hearing represents a significant escalation in the dispute, as the full circuit court's involvement suggests the legal questions involved are of substantial importance to federal administrative law. The original three-judge panel's decision had favored the government's jurisdictional arguments, but the en banc rehearing provides an opportunity for the full court to reconsider those conclusions.
Based on the questioning during Tuesday's arguments, the en banc panel appears more skeptical of the administration's position than the original three-judge panel. However, the court has not yet issued its decision, and the final outcome will likely have broader implications for presidential authority over federal agencies and the scope of judicial oversight in administrative disputes.
The case continues to develop as one of several high-profile legal challenges to Trump administration regulatory policies, with potential ramifications extending beyond the CFPB to other federal agencies facing similar reorganization efforts.