Catherine Leffert
The Consumer Financial Protection Bureau has dismissed or withdrawn more than half of its pending enforcement cases as the Trump administration clears the docket of work it inherited from the Biden era.
Since February, acting CFPB Director Russell Vought has dismissed 17 lawsuits and three civil investigative demands — 20 cases out of a total of 38 pending enforcement actions. Of those 20 dismissals or withdrawals, 18 were brought by former CFPB Director Rohit Chopra.
While there appears to be no clear pattern among the dismissed cases — aside from their dating from the prior administration — some lawyers said the CFPB appeared to favor banks and payday lenders. The reversals also are inconsistent with the CFPB’s priorities under Vought that were outlined in a memo last month by Mark Paoletta, the bureau’s chief legal officer.
“The dismissal of litigation muzzles the CFPB,” said Jared Tully, partner and practice group vice chair at Frost Brown Todd. “The obvious immediate implication is that banks will have to deal with fewer enforcement actions, which should allow banks to focus on banking, but it will not alleviate the need for banks to comply with regulations — even with the muzzle, the CFPB still has teeth.”
Many of the lawsuits were filed last year in the waning days of the Biden administration.
Vought and Paoletta delivered a major victory to three large banks — JPMorganChase, Wells Fargo and Bank of America — which were sued by Chopra in late December for failing to protect consumers from fraud perpetrated on Zelle, the bank-owned digital payments network run by Early Warning Services. In addition the CFPB also dropped separate lawsuits against Comerica Bank and Capital One.
“It’s like Chopra launched a thousand ships only to have this hurricane come through and wipe out half of the fleet,” said a partner in a law firm that regularly practices before the bureau, who requested anonymity to protect their clients. “I don’t think anyone expected the extent and speed of the dismissals so far.”
It can take years for federal regulators to construct and file an enforcement case. It’s not uncommon for an investigation to be closed without any filing of an administrative or federal court proceeding. CFPB enforcement attorneys, who spoke on the condition of anonymity for fear of retribution, said the cases should have been permitted to continue to their rightful end: whether the CFPB wins, the defendant wins or the court dismisses them. If a federal complaint is not grounded in law or fact, the legal system will bring it to a close, the attorneys said.
The Paoletta memo of the CFPB’s new priorities stated that going after consumer abuses in the mortgage industry would be a top priority.
Yet Vought, who had to sign off on all the lawsuits, dismissed those against two mortgage lenders: Rocket Homes, which was alleged to have provided kickbacks to real estate brokers; and Vanderbilt Mortgage & Finance, which was accused of risky lending practices in loans for manufactured homes. Vanderbilt is a unit of Berkshire Hathaway subsidiary Clayton Homes.
Chopra had sued Rocket in December and Vanderbilt in January in the rush of cases filed before the Trump administration took over.
Dropping so many lawsuits and investigations is a stunning reversal with no historical comparison, lawyers said. Some criticized Chopra for filing so many cases in the last two months of his tenure before he was fired by President Trump in February.
“There’s no doubt that many of these cases should never have been brought,” the lawyer who asked to remain anonymous said. “So it’s no surprise that new leadership is dismissing some of them.”
The Trump administration has tried to dismantle the CFPB and fire 90% of its employees, but its efforts have been thwarted by a federal court that has twice prohibited Vought from issuing mass layoffs, known as reductions in force. Several attorneys said that Paoletta’s memo of priorities was written primarily for the legal battle with the bureau’s union rather than as an earnest expression of the bureau’s new direction. The National Treasury Employees Union sued Vought in February to halt mass firings.
Paoletta said in the memo that the CFPB will focus going forward on fraud perpetrated against consumers. Yet, in one example that CFPB enforcement attorneys called egregious, the bureau in March dismissed a lawsuit filed last year against Acima Holdings and its founder and CEO Aaron Allred. Under Chopra, the CFPB had alleged that Acima disguised credit agreements as “leases” to circumvent the Truth in Lending Act and allegedly used deceptive marketing to lock consumers into high-cost financing arrangements.
Christine Chen Zinner, senior policy counsel at the nonprofit Consumer Financial Justice, said the CFPB is sending a signal to bad actors that they can get away with ripping off vulnerable and low-income consumers. The lawsuits that were dropped against Capital One, Early Warning Services, TransUnion and Vanderbilt, she said, send a signal to companies that the CFPB will not take action against large companies. At the same time, Zinner pointed to another dismissed lawsuit against Heights Finance Holding, a high-cost installment lender that operates mostly in Southern states, as an example of bad actors “facing no accountability.”
“Dropping cases like this against Heights Finance, where a predatory lender was picking the pockets of working class people, signals that it’s okay to pick on the little guy,” Zinner said.
The bureau has also had some major wins.
Last week, a federal judge ordered a now-defunct debt relief provider, FDATR Inc. and its owners, to pay roughly $43 million in restitution for deceiving student borrowers. That lawsuit was filed in the first Trump administration under former CFPB Director Kathy Kraninger.
In addition, last year, the CFPB and the Massachusetts Attorney General obtained a $50 million judgment against Commonwealth Equity Group, known as Key Credit Repair, for making false claims about its ability to improve credit scores and requesting upfront payments. The company was shuttered permanently.
The CFPB also continues to litigate against MoneyLion, a so-called challenger bank that the bureau alleged had violated the Military Lending Act by charging service members interest rates and fees that collectively exceed the law’s 36% interest rate cap. MoneyLion has said the CFPB’s allegations are false and has defended itself against them since the case was filed in 2022.
The CFPB’s memo states that defending service members is a priority for the Trump administration. But Zinner noted that the bureau has been referring to military personnel as “servicemen,” and has not used the term “servicemembers,” which includes women.
“They’re basically saying they will only protect servicemen — not women,” she said. “It’s not a coincidence that they’ve changed the language and it’s part of the broader pattern of concern about word choices and what they’re choosing to focus on. They’re walking everything back.”
More dismissals are expected.
On Thursday, the CFPB dismissed a lawsuit against Google Payment and on Friday dismissed another suit against PayPal. Both cases were supervisory actions, rather than enforcement actions, and the main point of contention was the CFPB’s authority to supervise the tech companies.
The bureau sought to put Google Payment under supervision due to concerns about how they handled user reports of payment errors and fraud on their platform, even though the Google Payment app had been discontinued. Similarly, the lawsuit against PayPal involved the CFPB’s attempt to regulate digital wallets and payments apps through “proactive examinations.”
