CFPB Faces Legal Challenge Over Work Halt, Resumes Key Operations

The U.S. Consumer Financial Protection Bureau (CFPB) is under legal scrutiny after abruptly halting operations last month. Following pressure from a court and employee union, the agency has now authorized several offices to resume functions deemed legally required, according to internal emails released Tuesday.

The CFPB initially canceled over 170 service contracts, including those supporting its enforcement and supervision divisions, after Acting Director Russell Vought ordered a work stoppage unless tasks were explicitly mandated by law. The move sparked backlash, with the National Treasury Employees Union and consumer advocates arguing that the administration cannot arbitrarily shut down a government agency mandated by Congress.

Confusion arose as CFPB staff received conflicting instructions. Mark Paoletta, the agency’s chief legal officer, later clarified that statutorily required duties must continue and invited employees to seek approval for their work. Over Sunday and Monday, Paoletta authorized multiple divisions, including Financial Education, Research, and Consumer Response, to resume operations.

However, the agency's supervision division, responsible for policing nonbanks and lenders with over $10 billion in assets, faced ambiguity. A senior official initially stated that supervision remained suspended, contradicting Paoletta’s directives. On Tuesday, Paoletta rebuked this claim, affirming that supervision-related work could proceed under statutory obligations. He requested a status update from the team by March 10.

The controversy underscores tensions over the CFPB’s future as the Trump administration faces allegations of attempting to dismantle the agency. While operations have partially resumed, legal challenges continue as unions and advocacy groups push for a court order preventing further disruptions. The CFPB has yet to provide an official comment on the situation.