CFPB Examiners Barred From Work Despite Agency’s Assurances

The Consumer Financial Protection Bureau’s examination unit isn’t supervising banks and other financial companies despite claims from agency leaders that they’re complying with all congressional mandates.

In a request to stay a March 28 preliminary injunction that would require the CFPB to bring back employees from administrative leave, agency leaders sought to assure a federal judge in Washington they were carrying out all legally required work, such as consumer response efforts.

But agency examiners haven’t been allowed to get back to reviewing big banks and nonbank companies for compliance with consumer financial protection laws, multiple sources who requested anonymity for fear of retaliation said. Instead, staff members were merely encouraged to organize their files, according to an internal CFPB email obtained by Bloomberg Law.

Examiners also aren’t allowed to consult with companies on outstanding “matters requiring attention"—a supervisory term for compliance issues that need to be fixed—or contact the banks and other companies they oversee in any way, the sources said.

The 2010 Dodd-Frank Act, which created the CFPB, required the agency to have an examination unit to conduct detailed reviews of companies under the agency’s authority.

The CFPB didn’t immediately respond to a request for comment.

Examiners Frozen

Last month’s preliminary injunction from Judge Amy Berman Jackson in the US District Court for the District of Columbia required the CFPB to bring workers back from administrative leave so they could perform their jobs.

Examination staff members were subsequently instructed to be in work-ready status retroactive to March 31, multiple sources said. But they weren’t allowed to do their examination work.

In an April 3 email obtained by Bloomberg Law, Calvin R. Hagins, the CFPB’s principal deputy assistant director for the Office of Supervision Examinations, said he and Cassandra Huggins, the CFPB’s principal deputy assistant director for supervision policy and operations, were still consulting with agency leadership about what approved projects could move forward.

“We recommend that you take this time to review and organize your files and emails, if you have available capacity,” the email said.

Hagins and Huggins “are not directing anyone to conduct this task, we are not requesting any updates from staff on whether you’re doing it, nor are we expecting managers to assess anyone’s progress on implementing it,” the email said.

The lack of clarity over what work CFPB examiners can do reflects long-running confusion that led to Jackson’s March 28 order.

Russell Vought, the CFPB’s acting director, sent a broad stop-work order to employees on Feb. 10, shortly after taking over.

As litigation filed by the National Treasury Employees Union, which represents many CFPB employees, progressed, agency employees initially were instructed to consult with Vought or agency Chief Legal Officer Mark Paoletta about what work could be done.

The CFPB then sent an email in late February telling employees they don’t need express consent from Paoletta or Vought to undertake mandated work.

In a March 3 email to examination staff previously obtained by Bloomberg Law, Huggins indicated she received conflicting guidance from Adam Martinez, the CFPB’s chief operating officer.

“Please do not work on anything else without authorization,” Huggins said at the time.

Paoletta sent an email to examination staff the following day raising “significant concerns” about Huggins’ email and advising examiners they could carry out statutorily mandated work without authorization.

Rather than conducting exams, however, supervisors were instructed only to send a report to CFPB leadership summarizing the work they do.

A federal appeals court is set to hear arguments this week as it decides whether to put a broader hold on Jackson’s order halting Vought’s shutdown moves.