By Douglas Gillison and Daniel Wiessner
(Reuters) – Top officials at the embattled U.S. Consumer Financial Protection Bureau have not allowed staff to resume supervising financial companies despite committing to engage in all legally-required work, according to an internal email seen by Reuters.
The apparent decision to keep supervision inert could run counter to claims the CFPB has made in court that it remains committed to meeting its legal obligations. The agency has denied in court papers that intends to abolish the agency completely, arguing that some of its functions are continuing.
In an email sent on Monday, Cassandra Huggins, a top official in the CFPB’s division of supervision, said senior officials at the agency had confirmed that supervisory work is not to resume, despite staff being told one day prior that they should still be carrying out all legally mandatory work.
“We have requested and received clarification that their message was not intended to authorize the reinstatement of supervision/examination activity, even though the Bureau is required by law to carry out these activities,” Huggins wrote, according to a copy seen by Reuters.
The CFPB is the only federal agency with the power to supervise non-bank financial institutions for compliance with consumer financial law. The CFPB also has primary authority to police consumer financial protection laws in larger banks.
Huggins’ message comes one day after a separate internal message from Mark Paoletta, the top lawyer at the CFPB, who said he was writing to be certain “everyone is carrying out any statutorily required work.”
According to a copy of that email seen by Reuters, Paoletta emphasized staff should be fulfilling legally required duties amid a broader effort to halt other work at the agency.
A spokesperson for the agency said Monday that it is false that staff have been told not to resume supervisory work and noted that Paoletta’s email “says the exact opposite.”
Staff had previously been ordered to halt supervision and examination activity by acting director Russell Vought.
On Monday, government lawyers appeared in federal court in Washington, D.C., to oppose a bid by a union representing CFPB workers, consumer advocacy organizations and others seeking a court order blocking the dismantling of the agency.
In court papers, top CFPB officials have said the agency remains committed to meeting its obligations under the law, rejecting arguments that by idling the majority of the agency’s staff and canceling the bulk of its contracts, the Trump administration is violating the law.
Instead, the Trump administration and Republican critics of the agency argue it has overstepped its authority in the past and should be drastically curtailed.
During a February 14 hearing on the lawsuit, the Trump administration agreed to temporarily refrain from firing more of the agency’s staff, pending further litigation. The administration also agreed not to destroy or remove any of the agency’s vast quantities of sensitive consumer and commercial data or transfer any of its available funds back to the U.S. Federal Reserve.
At Monday’s hearing, U.S. District Judge Amy Berman Jackson seemed poised to extend the block on CFPB from firing workers or taking other actions that would imperil its most critical functions required by federal law, such as responding to consumer complaints and conducting research.
Jackson pushed back against a U.S. Department of Justice lawyer’s claims that issuing such an order would amount to improper “wholesale oversight of agency management” by the court.
“I think what we’re talking about is interim oversight to make sure that (the bureau) hasn’t been shirked out of its very existence before I get to rule on the merits,” Jackson, an appointee of Democratic former President Barack Obama, said to the lawyer, Liam Holland.
Jackson scheduled a hearing for March 10 when both sides can present evidence and testimony about the work still being done at the CFPB. The judge said that CFPB Chief Operating Officer Adam Martinez will testify.
Jackson will then decide whether to block the bureau from taking certain actions, pending the outcome of the lawsuit.
(Reporting by Douglas Gillison, Daniel Wiessner and Chris Prentice, Editing by Alexia Garamfalvi and Nick Zieminski)
