CFPB staff and leaders clash about whether they’re allowed to work

Leadership and staff at the Consumer Financial Protection Bureau (CFPB) are clashing in court over whether the Trump administration is seeking to wind down the agency and if it has allowed workers to continue their legally required duties. Now, a key agency executive is expected to testify in a hearing next week, after a judge expressed concerns the agency would be shut down before she had a chance to weigh in.

The CFPB has been targeted by the Department of Government Efficiency (DOGE), with Elon Musk posting “RIP” to the agency in early February, and a lawsuit filed by the National Treasury Employees Union (NTEU) seeks to halt its effective shutdown. Last week, several CFPB employees — some anonymous but who offered to provide their identities to the judge under seal — submitted sworn statements that the Trump administration is trying to fire the “vast majority” of agency workers and make it so “that the CFPB would exist in name only.”

Over the weekend, agency chief operating officer Adam Martinez responded to allegations that he had misled the court about the future of the agency and what workers were being permitted to do. In the new declaration, Martinez says CFPB leadership is really looking to “rightsize” the agency.

But in a hearing on Monday to discuss a preliminary injunction on the terminations, Judge Amy Berman Jackson worried that CFPB leadership was issuing directives “with people’s fingers crossed behind their backs,” according to Bloomberg Law reporter Evan Weinberger. Jackson considered ways to ensure the agency wouldn’t be “choked out of existence before I get to rule,” Weinberger reported, saying that Martinez would be called to testify next week at a hearing scheduled for 10AM on Monday.

The CFPB enforces the law and writes regulations for the financial services industry, which has increasingly come to include both digital products from traditional finance companies and financial services projects from tech firms. Under its typical operations, the agency would field consumer complaints about financial products and regulate digital payments apps, like the kind that Musk’s X is planning to offer.

The NTEU alleges the Trump administration is violating the US separation of powers by dismantling an agency created and funded by Congress, pointing to directives from CFPB acting director Russell Vought for staff to halt their work. Martinez’s February 24th declaration to the court tried to establish that staff had been permitted to continue statutorily required work. But last week, several current and former CFPB staffers told the court that the Trump administration really was seeking to shut down the agency and that even legally mandated work had been halted. They cited Martinez’s own references in early February to the “closure of the agency,” which he said was in “wind down mode.”

In his Sunday declaration, Martinez tried to explain the alleged discrepancies. He did not dispute the portrayal of his statements, saying they reflected his understanding of agency leadership’s stance at the time. But since then, “a great deal has evolved at the CFPB,” Martinez says.

Once Vought was named acting chief of the CFPB on February 7th, Martinez says, the focus shifted to “right sizing” the agency. Even though the statements that CFPB staff referenced from Martinez came after Vought’s appointment, he says that’s because he still saw it as “a very fluid situation” during that week, and “time was needed for new leadership to refocus the Bureau.” Martinez says that new leadership has “taken a methodical approach to handling the Bureau’s operations and responding to senior executives who have recommended or requested guidance to perform each of the CFPB’s critical statutory responsibilities.”

Martinez casts doubt on one staffer’s declaration that unnamed senior executives said the agency would not exist, saying that would be “inconsistent” with leadership’s directives. He also pushed back on the declaration from Matthew Pfaff, CFPB chief of staff for the Office of Consumer Response, who said that complaints to the agency — including pleas about imminent foreclosure, typically handled by the Escalated Case Management team — were not being monitored or investigated. Martinez claims that, as of February 27th, the Escalated Case Management team is working.

But that’s “blatantly false,” Pfaff says in a new declaration responding to Martinez’s updated statement. “For those who face urgent situations—e.g., a person who submits a complaint about losing their home to an imminent foreclosure—there is simply no one at the CFPB to help,” Pfaff writes. A supervisor of the Escalated Case Management team also filed a sworn declaration, using a pseudonym for fear of retaliation, saying their team had not performed work since Vought’s February 10th order to “stand down from performing any work task,” which they say “had no exception for statutorily mandated functions.”

Martinez claims he is personally helping staff seek clarification about which legally mandated responsibilities he says they can continue to carry out. But Pfaff says Martinez has not yet provided guidance to him after sending a memo two weeks ago about “key statutory work” and says he’s “aware of several inquiries to Mr. Martinez, requesting authorization to perform statutorily authorized work, which have been ignored.”

Ahead of Monday’s hearing, the agency appeared to try to button up its response, characterizing any interpretation of its earlier directives to stop legally mandated work to be a misunderstanding. In an email obtained by noti.group, CFPB chief legal officer Mark Paoletta wrote that it’s come to his attention “that some employees have not been performing statutorily required work. Let me be clear: Employees should be performing work that is required by law and do not need to seek prior approval to do so.”